Tesla’s profits have plummeted by 71 per cent in the first quarter of 2025, a collapse driven by weakening vehicle sales, political controversy and rising competition, thereby marking one of the toughest periods the electric vehicle pioneer has faced in years.
Tesla’s Financial Strength Shaken
Elon Musk’s Tesla posted $409 million in net income on $19.3 billion in revenue, falling well short of analyst expectations and underlining growing pressures on the company’s business model. Tesla’s car sales revenue plunged by 20 per cent compared to a year ago, reflecting not only a softening market but a series of self-inflicted wounds.
Only Just Kept Out of the Red
In fact, the company’s results show that Tesla was only kept out of the red by selling $595 million worth of zero-emissions credits. Without these, Tesla would have recorded a loss – a stark shift for a business once seen as the powerhouse of the EV industry.
Second Consecutive Quarter Decline
It’s now the second consecutive quarter of dramatic year-on-year declines, with Tesla also warning that ongoing political uncertainty and evolving trade policies could make recovery even harder in 2025.
Musk’s Brand Damaged
Much of the recent backlash against Tesla has centred on CEO Elon Musk himself. His high-profile involvement in the Trump administration’s Department of Government Efficiency (DOGE) programme has sparked protests, vandalism of Tesla dealerships, and a surge in negative sentiment towards the brand.
Public opinion polls show Musk’s favourability ratings have dropped sharply since taking on his controversial White House role. Although Musk confirmed he will now be reducing his government involvement, pledging to spend more time at Tesla from May onwards, some damage to the company’s reputation already appears to be baked in.
Not surprisingly, shareholders have grown increasingly concerned, with some suggesting that Tesla’s recent slide can be traced directly to Musk’s divided focus and political entanglements. For example, Tesla stock is now down around 50 per cent from its peak in December 2024.
Tariffs and Trade Wars Add More Pressure
It seems that Tesla now also faces external challenges, fuelled by Musk’s friend and associate President Trump’s trade war policies, including new tariffs, which are putting strain on the company’s supply chains and cost base. While Musk has publicly advocated for lower tariffs, Tesla remains exposed due to its reliance on imported parts, despite its US-based manufacturing footprint.
The company’s latest earnings statement highlighted that “rapidly evolving trade policy” and “changing political sentiment” are likely to affect demand for Tesla products in the near term, particularly outside the US where sentiment towards Musk’s political stance may carry additional weight.
Product Delays and Competitive Threats
Meanwhile, rivals have taken full advantage of Tesla’s slowdown. For example, Chinese manufacturer BYD, in particular, has surged ahead globally, offering new models at lower price points and packing in increasingly sophisticated technology. BYD recently overtook Tesla as the world’s top EV seller by volume, a major psychological and market shift that could have long-term effects on Tesla’s standing.
In Europe, brands like BMW, Volkswagen, and Hyundai are also eating into Tesla’s market share, while in the UK, MG (backed by Chinese automaker SAIC) has grown rapidly to become one of the best-selling EV brands. MG’s affordable models like the MG4 have resonated strongly with British buyers looking for value and reliability, placing direct pressure on Tesla’s more expensive offerings.
Tesla’s situation has also been made worse by a major recall of nearly 4,000 Cybertrucks due to a faulty accelerator pedal, just months after the vehicle’s launch. The recall has further dented confidence in Tesla’s ability to deliver new models without critical flaws, at a time when competition is growing fiercer by the day.
As a result, Tesla’s dominance in the UK EV market has slipped, with recent figures showing it falling behind local favourites and newer Asian entrants in key sales rankings. This trend has been further accelerated by consumer concerns over Musk’s politics, which some analysts believe has made the brand less appealing to mainstream buyers in the UK and Europe.
More Affordable Model On The Way
Musk has promised that production of a new, more affordable Tesla model will begin in June 2025, using a modified version of the existing manufacturing platform rather than a full next-generation overhaul. However, scepticism remains, especially after Reuters reported potential delays to these plans earlier this month.
Without a compelling, lower-cost alternative soon, it looks as though Tesla risks losing even more ground to rivals that are moving faster and offering sharper value.
Uncertain Future For Robotaxis and AI Projects
Musk’s bold claims around Tesla’s Robotaxi and Optimus robot programmes have also drawn some scrutiny. Musk stated that an initial Robotaxi service will launch in Austin, Texas, this June, with broader rollouts later in the year, and he predicted that Tesla vehicles would be capable of fully autonomous driving by the end of 2025.
However, Tesla has repeatedly missed self-driving targets in the past, and internal analysis reportedly suggests that Robotaxi services would lose money for an extended period even if technically successful. Investors remain wary of promises that may be years away from full commercial viability.
What Does This Mean For Your Business?
For those operating in sectors linked to clean energy, automotive technology, or international trade, Tesla’s latest struggles could create real ripple effects. If Tesla stumbles further, it risks not only damaging its own future but also unsettling wider supply chains, investment patterns, and consumer expectations, including here in the UK, where Tesla has been a visible flagbearer for EV adoption.
There is still a chance that Musk’s decision to scale back his government commitments and refocus on Tesla’s core business could help stabilise the situation. The company’s push to launch more affordable models (if delivered successfully) may also help to re-energise its position in increasingly crowded global markets. However, with Tesla’s brand reputation, operational execution, and international supply resilience now all under intense pressure, many businesses and stakeholders will be watching the next six months very closely.
It also cannot be ignored that many critics see Elon Musk himself as a key factor behind Tesla’s current predicament. His divisive political involvement, coupled with persistent overpromises on self-driving technology and other initiatives, have arguably fuelled much of the backlash the company is now facing. In today’s volatile market, even the strongest tech brands are not immune to political risks, operational missteps, or shifting public sentiment.
Whether this is merely a temporary stumble or the start of a deeper turning point remains to be seen. What is clear, though, is that the road ahead for Tesla, and for businesses that depend on its ecosystem, looks far bumpier than anyone might have predicted just a year ago.