Tesla Q1 performance "disaster," profits plummet 40% far below expectations, low-priced cars still planned for production in the first half of the year | Earnings Report Insights

In the first quarter of the tariff war ignited by the Trump administration, Tesla's profits and revenues fell far short of Wall Street expectations due to a downturn in its main business of automotive sales.

Tesla attributed the decline in performance to the "uncertainty" of government trade policies. In the earnings report, unlike the fourth quarter report, it did not predict that automotive deliveries would rebound this year after last year's decline, but stated that guidance for the year would be updated in the second quarter report. However, Tesla also had bright spots: its energy business continued to grow strongly, and it expected an increase in energy demand, reaffirming its plan to produce new vehicles in the first half of the year, including low-priced cars.

Notable Tesla bull and Wedbush Securities analyst Dan Ives commented that the first quarter performance was a "disaster." He reiterated that the performance of Tesla's stock would depend on how long CEO Elon Musk remains involved with the Trump administration; if Musk not only does not step back but continues to "engage in politics," Tesla's stock would face "negative impacts," as the damage to the Tesla brand could continue to worsen.

During the earnings call, Musk hinted that he would no longer devote significant energy to the "Department of Government Efficiency" (DOGE) of the Trump administration next month and would invest more time in Tesla, easing concerns among investors worried that Musk's political activities could affect Tesla's performance and outlook, which helped boost Tesla's stock price in after-hours trading.

After the earnings report was released, Tesla's stock price, which had risen over 1% in after-hours trading, quickly turned negative, dropping more than 1% at one point, before turning positive again. Following President Trump's statement in after-hours trading that he did not plan to dismiss Federal Reserve Chairman Jerome Powell, U.S. stock index futures rose broadly, and Tesla's after-hours gains expanded to over 3%. After Musk mentioned reducing the time spent on DOGE work, Tesla's stock further increased in after-hours trading, currently up over 5%.

On April 22, Tuesday, Eastern Time, Tesla announced its financial performance for the first quarter of 2025.

1) Key Financial Data

Revenue: Tesla's operating revenue in the first quarter was $19.34 billion, a year-on-year decrease of 9%, while analysts expected $21.37 billion, with a 2% year-on-year increase in the fourth quarter.

EPS: The adjusted earnings per share (EPS) under non-GAAP standards for the first quarter was $0.17, a year-on-year decrease of 40%, while analysts expected $0.43, with a 3% year-on-year increase in the fourth quarter.

Operating Profit: The operating profit for the first quarter was $399 million, a year-on-year decrease of 66%, while analysts expected $1.13 billion, with a 23% year-on-year decrease in the fourth quarter.

Net Profit: The adjusted net profit for the first quarter was $934 million, a year-on-year decrease of 39%, with a 71% year-on-year decrease in the fourth quarter.

Profit Margin: The operating profit margin for the first quarter was 2.1%, compared to 6.2% in the fourth quarter and 5.5% a year ago; the gross profit margin for the first quarter was 16.3%, unchanged from the fourth quarter, down 104 basis points from a year ago, while analysts expected 16.1%Capital Expenditure: Capital expenditure in the first quarter was $1.492 billion, a year-on-year decrease of 46%, while analysts expected $2.49 billion, with a year-on-year increase of 21% in the fourth quarter.

Free Cash Flow: Free cash flow in the first quarter was $664 million, a year-on-year increase of 126%, while analysts expected $1.08 billion, with a year-on-year decrease of 1.6% in the fourth quarter.

2) Segment Business Data

Automotive: Automotive revenue in the first quarter was $14 billion, a year-on-year decrease of 20%, with an 8% year-on-year decrease in the fourth quarter. The gross margin for the automotive business, excluding regulatory credit points, was 12.5%, while analysts expected 11.9%, and it was 13.6% in the fourth quarter.

Energy Storage: Revenue from energy production and storage in the first quarter was $2.638 billion, a year-on-year increase of 67%, with a year-on-year increase of 113% in the fourth quarter.

First Quarter Revenue Decreased by 9% Compared to Last Year, EPS Lower than Expected by Over 60%, Automotive Revenue Down 20%

The financial report shows that Tesla's revenue in the first quarter recorded its first year-on-year decline since the first quarter of 2020, falling 9.5% below analysts' expectations for total revenue. In other words, analysts expected a slight year-on-year increase in the first quarter.

Tesla's EPS earnings in the first quarter were also far below expectations, 60.5% lower than analysts' expected levels. Analysts expected EPS to decrease by 4.4% year-on-year, while Tesla reported a 40% decline in EPS.

Tesla's net profit under GAAP, i.e., before adjustments, was $409 million in the first quarter, a year-on-year decline of 71%, far exceeding the adjusted decline of 39%.

The decline in Tesla's revenue in the first quarter was due to a 20% decrease in automotive revenue, reaching its lowest point since the third quarter of 2021. If we exclude the "carbon credit" revenue of $595 million from regulatory credit points, Tesla's revenue solely from car sales would be even lower; however, the decline in the gross margin of the automotive business was not as severe as analysts had expected.

Tesla stated that the decline in sales in the first quarter was partly due to upgrades to the Model Y production lines at all four of its automotive manufacturing plants, resulting in reduced vehicle deliveries; price reductions and sales subsidies for vehicles; and a negative foreign exchange rate impact of $200 million due to the depreciation of the dollar.

In fact, in addition to the Model Y production line upgrades, the impact of the boycott against Tesla, which Musk has been implicated in, cannot be ignored in the first quarter.

Last month, Wall Street Insight mentioned multiple times that since Trump took office, there have been frequent incidents of violence and vandalism against Tesla, including charging stations being burned, showrooms being shot at, and owners being humiliated, along with a global protest movement to “Take Down Tesla” directly targeting MuskAs a result, Tesla's sales in several European countries have seen a double-digit decline. Analysts warn that the politicization of Tesla poses a serious threat to the brand.

The first-quarter delivery volume released by Tesla earlier this month also partially confirms the destructive nature of Musk's "political involvement." The quarterly delivery volume decreased by 13% year-on-year to 336,681 units, marking a nearly two-year low and falling nearly 14% below analysts' expectations.

Still plans to start production of low-cost vehicles and other new cars in the first half of the year

In the product outlook of the financial report, Tesla completely copied the wording from the fourth-quarter financial report, stating,

"New vehicles, including more affordable models, are still expected to begin production in the first half of 2025. These vehicles will utilize the next-generation platform as well as certain features of Tesla's existing platform and will be produced on the same production line as the current vehicle series."

Like the fourth-quarter report, this report also anticipates that the autonomous taxi Cybercab plan will begin mass production in 2026.

First-quarter energy storage deployment capacity increased by 154%, Powerwall hits record high for four consecutive quarters

In the first quarter, Tesla's energy business revenue growth slowed compared to the fourth quarter, but double-digit growth partially offset the decline in automotive revenue, preventing the overall revenue drop from exceeding 10%.

In the fourth quarter of last year, Tesla deployed a record 11,000 megawatt-hours (MWh) of battery storage products, with a year-on-year increase of 243%. In the first quarter, Tesla's battery storage deployment capacity reached 10,400 MWh, close to the record set in the fourth quarter, with a year-on-year increase of 154%. Although the growth rate slowed compared to the fourth quarter, it was still higher than the annual growth level of 113% last year.

Tesla stated that the deployment of Powerwall products in the energy business has set a record for the highest quarterly installation for four consecutive quarters, with the Powerwall installation capacity in the first quarter exceeding 1 GWh for the first time in the company's history, and supply remains constrained.

Trade policies and changes in political sentiment may severely impact product demand in the short term

Tesla emphasized the impact of "uncertainty" in trade policies at the beginning of the financial report and hinted that the political sentiment triggered by tariffs from the Trump administration would dampen market demand for Tesla products. The report stated:

"Due to the rapidly changing trade policies adversely affecting Tesla and its peers' global supply chains and cost structures, uncertainty in the automotive and energy markets continues to rise. This dynamic, combined with changing political sentiment, may significantly impact the demand for our products in the short term."

The report also acknowledged that the impact of the Trump administration's tariff policies on Tesla's energy business is even greater than that on its automotive business. The report stated:

"While the current tariff situation has a relatively larger impact on our energy business compared to the automotive business, we are taking actions to stabilize our medium- to long-term business and focus on maintaining the health of our operations."

In the performance outlook section of the report, Tesla again mentioned the negative impact of trade policies and removed the statement from the fourth-quarter report that "we expect the automotive business to return to growth in 2025," no longer anticipating that this year's automotive delivery volume will return to positive growth, reiterating that the company's performance growth will depend on various factors, including the macro environment, and stated that it will update this year's performance guidance when releasing the second-quarter financial reportThe report stated:

"It is difficult to measure the impact of changes in global trade policies on the automotive and energy supply chains, our cost structure, and the demand for durable goods and related services. We are making prudent investments to prepare for growth in the automotive and energy businesses, but this year's growth rate will depend on various factors, including the acceleration of our autonomous driving business, the increase in factory output, and the broader macroeconomic environment. We will reassess the performance guidance for 2025 in the second quarter earnings report update."