Tesla's Q1 profit plummets 40%, far below expectations; Musk says he will significantly reduce "political" time, and after-hours stock price continues to rise

According to Zhitong Finance APP, Tesla (TSLA.US) announced its "bitter" Q1 2025 performance after the U.S. stock market closed on Tuesday, with a decline in vehicle deliveries leading to its revenue, profit, and other core financial metrics falling significantly below expectations. However, Tesla CEO Elon Musk stated during the earnings call that his time spent on the Department of Government Efficiency (DOGE) will be "substantially" reduced starting in May. Additionally, comments from U.S. President Trump after hours about "not intending to fire Powell" eased market sentiment. As of the time of publication, Tesla's stock rose nearly 5% in after-hours trading on Tuesday.

The earnings report showed that Tesla's Q1 revenue was only $19.335 billion, a year-on-year decrease of 9%, falling short of analysts' average expectation of $21.348 billion. Among them, revenue from the automotive business decreased by 20% year-on-year to $13.967 billion; revenue from energy and storage business surged by 67% year-on-year to $2.730 billion; and service and other revenue grew by 15% year-on-year to $2.638 billion.

Q1 gross profit was $3.153 billion, a year-on-year decrease of 15%; the gross margin was 16.3%, down 104 basis points from 17.4% in the same period last year. Operating profit was only $399 million, a sharp decline of 66% year-on-year; the operating margin was 2.1%, down 343 basis points from 5.5% in the same period last year.

Under Non-GAAP accounting standards, the net profit attributable to common shareholders was $934 million, a year-on-year decrease of 39%; the adjusted earnings per share were $0.27, a year-on-year decrease of 40%, falling short of analysts' average expectation of $0.43. Some analysts pointed out that without the $595 million earned from selling regulatory credits (carbon emission credits) in Q1, Tesla would have reported a loss.

The decline in vehicle deliveries is undoubtedly the core reason dragging down Tesla's Q1 performance. Previous delivery data showed that Tesla's total delivery volume in Q1 was 336,681 vehicles, a year-on-year decrease of 13%, marking the worst quarterly performance since 2022. In addition, the gross margin of the automotive business continued to decline to 12.5%, lower than 16.4% in the same period last year and 13.6% in the previous quarter.

Musk: Will Reduce Time Spent on U.S. Government Work

Musk stated during the earnings call that starting in May, he will "significantly reduce" his time spent on government work to focus on the electric vehicle manufacturer's business. Musk said, "I think, starting next month, the time I allocate to the Department of Government Efficiency will be significantly reduced." Musk expects that during "the remainder of the presidential term," he will still participate to some extent, but he will soon allocate more time to Tesla Elon Musk also stated that he plans to continue pushing Trump to eliminate tariffs that have impacted various industries, including Tesla. Trump's large-scale tariff increases on imported goods have frightened the market and raised concerns about rising prices for American consumers. However, Musk added that the decision on tariffs "is entirely up to the president."

For Tesla, tariffs have exacerbated the challenges it faces and could potentially disrupt the global automotive supply chain, raising costs across the entire automotive industry. Although Tesla has large factories in California and Texas, its impact is expected to be relatively smaller than that of many other automakers, but its vehicles still contain some non-American components, and the company has warned about potential impacts.

Musk stated that Tesla has been committed to localizing its supply chain to help alleviate logistics issues and minimize the risk of rising costs. He said, "We are the least affected automotive company by tariffs, which puts us in a better position than any competitor," but he emphasized that tariffs are still difficult to cope with.

Tesla Sends Cautious Signals and Will Reassess 2025 Guidance

Tesla stated in its earnings report that rapidly changing trade policies have adversely affected the global supply chain and Tesla's cost structure, with increasing uncertainty in the automotive and energy markets. This dynamic, coupled with changing political sentiments, could significantly impact the demand for Tesla products, especially in the short term.

Meanwhile, Tesla indicated that the company is "making cautious investments to lay the groundwork for growth in the automotive business." This growth will depend on factors including production expansion and the "broader macroeconomic environment."

It is worth noting that Tesla did not mention expectations for a recovery in automotive business growth in its earnings report. In the previous quarter's earnings call, the company had anticipated that the automotive business would resume growth in 2025. Tesla stated that it is currently difficult to assess the impact of changes in global trade policies on the supply chain, cost structure, and demand, and the company will reassess its 2025 guidance in the second quarter earnings report.

Additionally, Tesla noted that the current tariff situation has a greater impact on its energy business compared to its automotive business. Analysts pointed out that this refers to Tesla's large-scale energy storage battery, Megapack, which uses lithium iron phosphate batteries imported from China. In contrast, all vehicles sold by Tesla in the U.S. are assembled locally, although they are also affected by tariffs on imported components.

Drawing Up Plans Again?

In the latest earnings report, Tesla also disclosed that the production of a new affordable model is still scheduled to begin in the first half of 2025. This surprised some investors, as reports last week indicated that the production of Tesla's new affordable model would be delayed by several months.

It is reported that this new affordable model will integrate technologies from the next-generation platform and the current platform, sharing existing production lines. This approach allows for cautious capacity expansion during uncertain times and makes full use of the current expected maximum capacity of nearly 3 million vehicles. Production can increase by more than 60% compared to 2024 before investing in new production lines.

Tesla also anticipates that the autonomous taxi Cybercab will enter large-scale production in 2026. Additionally, Tesla stated that Robotaxi will begin pilot testing in Austin, Texas, in June this year, and will also pilot the manufacturing of the Optimus robot at the Fremont factory this year, deploying more robots to perform actual work in the factory The company also stated that its lithium refining plant and cathode material production facility located in Texas are expected to be put into operation this year