Tesla Profits Plunge 71% as Musk’s Political Role Backfires
Tesla reported a staggering 71% collapse in quarterly profits Tuesday, with earnings dropping to just $409 million from $1.4 billion in the same period last year. The dramatic decline comes amid mounting evidence that CEO Elon Musk’s controversial role in the Trump administration has damaged the brand’s appeal among its traditionally liberal customer base, creating what one prominent analyst has called a “Code Red situation” for the electric vehicle maker.
Revenue fell to $19.34 billion, significantly missing Wall Street’s expectations of $21.43 billion and dropping below even the $21.3 billion reported a year ago. The disappointing results intensify pressure on Musk to reconsider his government commitments and refocus on Tesla’s increasingly challenged core business as competitors gain ground in the EV market.
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Political Entanglements Trigger Consumer Backlash
Tesla’s brand erosion appears directly linked to Musk’s high-profile position leading the Department of Government Efficiency (DOGE) in the Trump administration and his increasingly partisan political statements. According to The New York Times, this political alignment “has turned away some liberals and centrists from buying Tesla vehicles,” undermining a customer base that previously embraced the company’s environmental mission regardless of political affiliation.
The consequences of this shift are becoming increasingly visible. Protests at Tesla showrooms have intensified in recent months, while vehicle registrations in key European regions declined in March. Perhaps most tellingly, resale values for used Teslas have collapsed, with iSeeCars data showing average prices falling more than 10% in March compared to the previous year – the largest drop of any automotive brand, with Model S and Model Y values plummeting by 17.2% and 13.1% respectively.
Dan Ives, a longtime Tesla bull at Wedbush Securities, has taken the extraordinary step of publicly calling for Musk to distance himself from the government, writing in a Sunday note to clients: “Musk needs to leave the government, take a major step back on DOGE, and get back to being CEO of Tesla full-time.” Ives maintained his Outperform rating and $315 price target despite the concerns, suggesting potential recovery if Musk refocuses on Tesla.
Global Sales Slide as Competition Intensifies
Tesla’s challenges extend beyond political backlash to fundamental market shifts. The company reported first-quarter vehicle deliveries of just 336,681 units, significantly below analyst expectations of 390,342 and marking the worst quarterly performance since Q2 2022. This 13% year-over-year decline in global sales suggests deeper competitive issues beyond brand perception.
In response to these challenges, Tesla has quietly withdrawn its long-term growth forecast, which had previously projected 50% annual growth. According to Yahoo Finance, the company cited “uncertainty in the automotive and energy markets” and “rapidly evolving trade policy” as factors adversely impacting its global supply chain and cost structure. Tesla indicated it will revisit its 2025 guidance in its second-quarter update.
Chinese manufacturer BYD has emerged as Tesla’s most formidable challenger, steadily eroding Tesla’s market share in key regions. Meanwhile, established automakers like General Motors, Volkswagen, and Hyundai continue expanding their electric vehicle offerings, creating unprecedented competition in a market Tesla once dominated almost exclusively.
Product Roadmap Clings to Original Timeline
Despite the disappointing financial results, Tesla maintained its commitment to launching new affordable vehicles in the first half of 2025, contradicting recent reports that such plans had been delayed. The company also reaffirmed that its robotaxi would enter volume production in 2026, though few details were provided about either initiative during the earnings release.
The company’s gross margin reached 16.3%, slightly exceeding the 16.1% analysts expected. However, automotive gross margin excluding regulatory credits fell to just 12.5%, highlighting continued pressure on the core vehicle business that has historically driven Tesla’s financial performance.
Cybertruck production has also been quietly scaled back as the vehicle’s polarizing design and high price tag have limited its appeal outside Tesla’s most devoted customer base. According to Business Insider, Tesla has begun repositioning the futuristic pickup as a “working man’s vehicle” after initially marketing it as a luxury status symbol.
As Tesla navigates these multiple challenges, all eyes remain on Musk’s next move. A recent Politico report suggested he might pare back his government duties “in the coming weeks,” a development that briefly lifted Tesla’s stock when the news broke. Whether such a shift would be sufficient to reverse Tesla’s current trajectory remains among the most consequential questions facing one of the world’s most valuable companies.
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