Tesla reported a substantial decline in earnings, sparking investor anxiety. Revenue dropped 12% year-over-year, while net income fell by 16%. A key driver of Tesla’s finances, the sale of regulatory credits, is projected to dwindle, further straining financial performance. The company attributes the downturn to factors including decreased sales, reduced regulatory credit revenue, a lower average vehicle selling price, and decreased revenue from energy generation and storage. Tesla is combating these headwinds by developing more affordable vehicle models slated for volume production in the latter half of 2025, and continuing to develop the Tesla Semi and Cybercab with volume production expected in 2026.
Concerns are mounting that Tesla’s free cash flow could turn negative, potentially triggering a decline in its share price. The company is actively implementing deals and incentives to bolster sales in the face of escalating competition, particularly in the Chinese and European markets, and facing global economic pressures.