Tesla’s Chief Executive Elon Musk cautioned investors on Wednesday that the company could face a period of weak financial performance as U.S. government incentives for electric vehicles are scaled back. The remarks, made on a quarterly earnings call, sent Tesla shares tumbling nearly 5%.
The warning follows Tesla’s steepest sales decline in over a decade. The automaker booked $22.5 billion in revenue for the second quarter, falling short of analyst estimates and down from $25.5 billion a year earlier.
Profit per share also came in below Wall Street expectations, although Tesla managed to surprise with a stronger-than-anticipated automotive gross margin, standing at 14.96%, excluding revenue from regulatory credits.
The CEO mentioned newly enacted U.S. policy changes that could remove as much as $7,500 in tax credits for American EV buyers later this year.
Musk acknowledged that the business may see further turbulence into the early next year until the rollout of its self-driving software and services, expected to contribute significant revenue by late 2025. Tesla is betting on its next-generation autonomous technologies, including robotaxi production scheduled for next year, as its primary growth driver.
In the meantime, efforts are focused on launching a more affordable vehicle. However, Chief Financial Officer Vaibhav Taneja signaled that production ramp-up would be slower than anticipated.
The company also reported a sharp decline in sales of regulatory credits—down 51%—which hurt both top and bottom-line results. Tesla global deliveries slumped 13.5% in the second quarter, despite the release of a refreshed Model Y, and the company remained noncommittal about its full-year deliveries forecast, citing economic uncertainty and the timing of the new model launch.
Industry analysts suggested that Tesla’s path forward hinges on the successful launch and positioning of its lower-priced car, which would appeal to broader consumer segments without cannibalizing sales of its premium vehicles.
