Tesla’s profit plunges 71% as Musk’s political role and global headwinds dent sales

Tesla’s profit plunges 71% as Musk’s political role and global headwinds dent sales

Tesla’s net income fell 71% in the first quarter of 2025, as CEO Elon Musk’s prominent political role, ongoing trade turbulence, and intensifying global competition battered the company’s core electric vehicle business. The company’s adjusted earnings per share came in at 27 cents, missing Wall Street expectations of 41 cents, while quarterly revenue dropped 9% year-over-year to $19.3 billion.

The electric vehicle maker cited weakening demand, rising costs tied to global tariffs, and consumer backlash stemming from Musk’s position in US President Donald Trump’s administration as key factors behind the decline. Tesla's vehicle sales fell 13% globally, with severe drops in the U.S., China, and Germany, the Wall Street Journal reported.

Musk says he’ll scale back political role

During the earnings call, Musk announced he would reduce his time spent on federal cost-cutting duties with the US Department of Government Efficiency (DOGE) starting next month. However, he struck a combative tone toward critics, defending his involvement in Trump’s administration.

“I believe the right thing to do is to fight the waste and fraud and try to get the country back on the right track,” Musk said. He also reiterated his opposition to tariffs, though acknowledged the decision ultimately rests with the president.

Tariffs and trade headwinds hit production and costs

Tesla noted that changing trade policies and Trump’s steep tariff regime — including 25% duties on auto imports and levies of up to 145% on some Chinese goods — have strained its supply chain and increased costs. The company currently imports some battery cells from China and is now seeking US-based alternatives.

Although Tesla builds its US vehicles in California and Texas, over 20% of its components come from Mexico, which has also been impacted by shifting trade rules. The company warned that continued uncertainty and “changing political sentiment” could impact future demand, prompting a potential revision of its 2025 sales forecast.

Brand takes a hit amid political fallout

Tesla has faced growing protests and reputational damage over Musk’s alignment with the Trump administration. In the first quarter, stores and charging stations in both the US and Europe were vandalised, while the company’s share of the EV market in California—the largest in the US—fell to 44% from 56% a year earlier, according to state data.

Musk acknowledged the backlash but emphasised plans to push ahead with upcoming launches, including a driverless robotaxi service set to debut in Austin, Texas, this June.

Sales fall despite price cuts and product refreshes

Tesla reported a 20% drop in revenue from its automotive division, driven by a double-digit decline in deliveries and lower selling prices, which were hurt by deeper sales promotions. The company also lost several weeks of production across its factories to prepare for a retooled Model Y—Tesla’s top-selling vehicle—which recently began rolling out.

To boost demand, Tesla introduced a lower-priced version of its Cybertruck in April, priced at $69,990 with pared-down features. A budget-friendly Model Y is also in the pipeline.

Energy and carbon credit sales offer bright spots

Despite the grim headline figures, Tesla’s energy business posted a 67% revenue increase, while its software subscription offerings also delivered double-digit growth. The company also reported $595 million in revenue from carbon credits sold to other automakers—up significantly from last year.

Still, Tesla’s operating margin dropped to 2.1% from 5.5% a year earlier, underscoring the pressure on profitability as the company juggles rising costs, political controversy, and a tougher competitive landscape.

A turbulent quarter with long-term risks

Tesla’s Q1 results reflect not only an industry-wide slowdown but also the growing costs of Musk’s political entanglements and global supply chain disruption. While the company is betting on AI, new vehicle launches, and robotaxis to turn the tide, its dominant EV position is under threat in key markets—and investor patience may soon be tested further.