Tesla is having a rough start to the year and reported dramatic declines in both its gross and net revenues for the first quarter of 2025 on Tuesday. The company’s bread-and-butter automotive revenue dropped by 20%. Tesla pointed to production disruptions, lower average selling prices due to higher incentives, and shifting U.S. trade policies as key contributors to the shortfall.
The automaker also missed several of Wall Street’s expectations, with earnings per share landing at 27 cents adjusted compared to analysts’ estimates of 39 cents. Total revenue fell to $19.34 billion, down from the $21.11 billion projection, marking a 9% year-over-year decline.
The company’s net income plummeted by a staggering 71% to $409 million, down from $1.39 billion in the same quarter last year. Operating income dropped 66% to $400 million, and Tesla posted a slim 2.1% operating margin for the quarter. Increased spending on artificial intelligence projects was cited as a factor in the margin squeeze.
Tesla’s automotive revenue slid from $17.4 billion to $14 billion year-over-year. According to the company, a significant contributor to this drop was production downtime at its four vehicle factories as they prepared for the rollout of a refreshed, lower-cost version of the popular Model Y SUV. However, sources indicated last week that the production of the updated Model Y will be postponed by approximately three months.
In addition, Tesla acknowledged that price reductions and aggressive sales incentives designed to stimulate demand further pressured its bottom line. Without revenue from regulatory credits—$595 million this quarter, up from $432 million a year ago—the company would have posted a loss on its core automotive operations.
Tesla shares have fallen 41% year-to-date, marking the company’s worst quarterly performance since 2022. While Tesla maintains that it is better positioned than competitors to weather the effects of President Trump’s sweeping new auto tariffs, it remains vulnerable to rising costs for key electric vehicle components like battery cells, automotive glass, and manufacturing equipment. During the earnings call, Elon Musk emphasized that he supports “predictable tariff structures” but personally favors free trade and lower tariffs.
Beyond the automotive segment, Tesla’s energy generation and storage business was a bright spot, with revenue jumping 67% year-over-year to $2.73 billion. The company noted that increasing demand for AI infrastructure is creating new opportunities for its energy storage products to support grid stability and power distribution.
Despite its challenges, Tesla remains committed to pushing innovation. The company reassured investors it’s on track for a pilot launch of its first robotaxi service in Austin, Texas, this June. It also plans to begin pilot production of its humanoid robots later this year in Fremont, California.
