Berliner Boersenzeitung - Tesla profits drop as Musk warns of 'rough' patch before riches

Musk, on an earnings conference call with analysts and investors, reiterated that Tesla's technology advantages position it for significant long-term profitability, but suggested the company's recent slump would continue or worsen in a difficult interim period until new autonomous transport ventures can be monetized.

At issue is the period after the $7,500 federal tax credit for EV purchases expires on September 30, among the green tax credits zeroed out by Trump's sweeping package approved earlier this month.

"We probably could have a few rough quarters. I'm not saying we will, but we could," Musk said of a period that immediately follows the expiration of the US tax credit for EVs.

"But once you get to autonomy at scale" by the second half of 2026, "I'd be surprised if Tesla economics are not very compelling," said Musk.

His comments acknowledge more short-term pain following Wednesday's results, its third straight quarter of lower profitability as the company faces intensifying electric vehicle competition and deals with backlash due to Musk's political activities.

Tesla reported second-quarter profits of $1.2 billion, down 16 percent from the year-ago level. The company in a press release emphasized ongoing efforts to lead in artificial intelligence and robotics.

Revenues fell 12 percent to $22.5 billion.

Lower profits had been expected after Tesla earlier this month disclosed a decline in auto deliveries. Results were also impacted by a fall in average vehicle selling prices and higher operating expenses driven by AI and other research and development projects.

Tesla did not offer an outlook on full-year vehicle production, citing shifting global trade and fiscal policies, as well as factors such as "the broader macroeconomic environment, the rate of acceleration of our autonomy efforts and production ramp at our factories."

- 'Top pick' -

The results come on the heels of Tesla's launch last month of a robotaxi service in the Texas capital Austin, Musk's first fully autonomous offering after pushing back the timeframe many times.

Musk has heavily touted Tesla's autonomous driving program, as well as the company's "Optimus" humanoid robot, which employs artificial intelligence technology.

But analysts have criticized Tesla's sluggishness in unveiling new autos, while questioning Musk's commitment to an earlier goal of launching a state-of-the-art electric vehicle priced at around $25,000 to bolster the odds of mass deployment.

On the call, Musk reiterated his desire for a lower priced vehicle. Tesla's press release said the company began building "a more affordable model" in June, with volume set to rise in the second half of 2025.

Tesla executives said they had pushed back the ramp-up on the new vehicle in order to maximize production of the company's current generation of autos before the federal tax credit expires.

The worsening near-term outlook for EV sales is one reason analysts at JPMorgan Chase call Tesla's stock price "completely divorced from increasingly deteriorating fundamentals."

But analysts at Morgan Stanley rate the company a "top pick" in light of its leadership in robotics and artificial intelligence, although a recent note warned Musk's political activity "may add further near-term pressure" to shares.

- Political controversies -

Disagreements over Trump's fiscal package have been a factor in Musk's recurring feud with the president, whose name was not mentioned during the 60-minute conference call.

The billionaire donated huge sums to Trump's successful 2024 presidential campaign and then joined the administration to lead the "Department of Government Efficiency," which cut thousands of government jobs, sparking boycotts and vandalism that tarnished the Tesla brand.

Musk left the White House in May.

After their bitter falling out, Musk warned Trump's legislation would bankrupt the country. On July 5 the tech mogul announced he was launching a new political party in the United States, the "America Party."

Trump dismissed the launch as "ridiculous," and has also threatened to look at deporting Musk and to revoking his government contracts.

Shares of Tesla fell 4.1 percent in after-hours trading.

(B.Hartmann--BBZ)