Tesla Braces for 'Rough Quarters' Ahead as US Reduces EV Support

Tesla CEO Elon Musk has cautioned that the company may face a few challenging quarters due to reduced U.S. government support for electric vehicles (EVs). Speaking during Tesla’s latest earnings call, Musk pointed to upcoming revenue from self-driving software and robotaxi services are expected to begin late next year as a long-term remedy.

 

Tesla's shares fell nearly 5% following the announcement. The company posted its steepest quarterly sales decline in over a decade and missed Wall Street's profit expectations. Still, its automotive gross margin came in slightly better than anticipated, supported by reduced production costs.

 

While Tesla is focusing on a more affordable vehicle, production will ramp up slower than planned, according to CFO Vaibhav Taneja. The company confirmed that initial units were built by June-end but gave no specifics on pricing or volume. Tesla also held back from updating its full-year delivery forecast, citing economic uncertainty.

 

Revenue for Q2 dropped to $22.5 billion from $25.5 billion a year earlier, with adjusted earnings of 40 cents per share falling short of expectations. A sharp drop in regulatory credit sales also impacted the results. Global deliveries fell by 13.5% in Q2, while a $7,500 federal tax credit for EVs is set to be scaled back later this year.

 

Despite setbacks, Musk remains optimistic about autonomy. He said Tesla expects to roll out autonomous ride-hailing services to nearly half of the U.S. population by year-end, with the robotaxi business likely contributing materially to financials by late 2026. The Cybercab and Semi Truck are also slated for volume production in 2026.

 

Tesla faces stiff competition from lower-priced Chinese EVs and criticism over Musk’s political affiliations. Meanwhile, several senior executives have exited recently, raising investor concerns about leadership stability. Musk, who launched a political party this month, insists he will now refocus on his businesses.

 

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