Tesla’s rough ride continues.
The No. 1 US EV maker on Wednesday released a Q2 earnings report that again showed significant financial impacts amid cooling EV demand and backlash to CEO Elon Musk’s foray into right-wing politics.
The EV maker reported $1.2 billion in net income, down 16% YoY. Automotive revenues fell 16%, as well, while overall revenue was down 12%.
In an update for investors, the company attributed its falling profits to lower revenue from regulatory credits Tesla sells to other automakers, an increase in operating expenses, and a decline in vehicle deliveries, among other factors. Tesla’s vehicle deliveries fell 13% YoY in Q2.
As The Verge noted, Tesla is likely to see its revenue from regulatory credit sales largely go away, thanks to a Trump administration plan to cancel fines for automakers that exceed fuel-efficiency goals.
Investment research firm CFRA lowered its 12-month price target for Tesla shares by $20 to $300, and maintained its hold opinion.
Tesla’s earnings call “confirmed many of the concerns we had raised regarding the Tesla story, with management stating that the recently passed tax bill is going to have a material impact on its business,” Garrett Nelson, VP and senior equity analyst at CFRA, wrote in a research note. “We continue to view the near-term challenges facing the company as underappreciated by investors.”
Looking ahead: Tesla executives shared updates on plans to start volume production of a new, much-anticipated affordable EV model in the second half of this year, as well as on the planned expansion of its robotaxi service.
Musk has put Tesla’s robotaxi business and humanoid robots at the center of the company’s growth plans. Tesla debuted a limited robotaxi service with human safety operators in the vehicles in Austin last month, and is working to expand it in other markets in the near future.
“We are expecting to greatly increase the service area to well in excess of what competitors are doing, hopefully in a week or two,” Musk said on Tesla’s earnings call. “We are getting the regulatory permission to launch in the Bay Area, Nevada, Arizona, Florida, and a number of other places.”
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He predicted that Tesla will offer robotaxi services “in probably half the population of the US by the end of the year.”
In a statement, Will Rhind, founder and CEO of investment firm GraniteShares, said that Tesla’s “slow progress on the low-cost EV model and the robotaxi business is a little surprising.”
“The company indicating that it will ramp up production starting later this year is encouraging, but the lack of structure and detail around what these initiatives will look like makes me cautious,” he added.
Musk, noting the upcoming expiration of EV tax credits that has analysts widely predicting slower EV adoption, acknowledged that Tesla could be in for “a few rough quarters” ahead.
GM: Meanwhile, General Motors on Tuesday reported Q2 net income of $1.9 billion on revenue of $47.1 billion, down 35.4% and 1.8% YoY, respectively. The automaker maintained its full-year guidance.
The results reflected a $1.1 billion hit GM took as a result of tariffs. GM executives expect the impact to be even greater in Q3, Reuters reported.
Amid the changes in trade policy, GM in June announced $4 billion in investments in its US assembly plants. “This will help us satisfy unmet customer demand, greatly reduce our tariff exposure, and capture upside opportunities as we launch new models,” CEO Mary Barra wrote in a letter to shareholders.
Though Barra said that GM now sees a “longer runway” for internal combustion engine vehicles, she reiterated the automaker’s plans to push ahead on electrification.
“Despite slower EV industry growth, we believe the long-term future is profitable electric vehicle production, and this continues to be our north star,” Barra said.