Key Takeaways from Tesla's Earnings Call
3min read Tesla Q1 Earnings: Revenue Miss and Musk's Refocus Drive Premarket Stock Rebound
Tesla reported revenue of $19.34 billion in Q1, a 9% year-over-year decline, falling short of the expected $21.37 billion. Adjusted net income came in at $934 million, down 39% year-over-year.
Despite the earnings miss, the negative sentiment was largely priced in. Investors focused more on Elon Musk returning to core Tesla operations. Combined with a sharp rebound in U.S. equities, Tesla's stock rose nearly 6% in premarket trading.
Key Takeaways from Tesla's Earnings Call
Musk's Personal Focus: Scaling Back Department of Government Efficiency Activities
Musk began the call defending his recent involvement in the so-called Department of Government Efficiency (DOGE), arguing that cutting government waste was necessary and that critics were mostly those who previously benefited from inefficiencies.
However, he stated that DOGE's core mission had been completed and that starting in May, he would significantly reduce time spent on it—only one or two days a week—while devoting the rest to Tesla's core business.
Automotive Business: Product Strength Intact, No Demand Decline
On Tesla's underwhelming Q1 results, Musk partly blamed the cold weather, saying people were less inclined to shop for cars in winter. Production was also affected by an off-season upgrade to the Model Y, Tesla's best-selling model. Musk admitted that his government-related work may have negatively impacted his personal image.
Nonetheless, the previous generation Model Y was sold out in the U.S., China, and several other markets, demonstrating Tesla's strong product appeal.
Despite facing negative media sentiment in California, Tesla remained the state's best-selling brand in Q1. Global test drives also hit a record high, reflecting the brand's resilience. Apart from broad macroeconomic headwinds, Musk saw no decline in consumer demand.
He claimed that companies capable of mass-producing autonomous vehicles and intelligent robots at low cost would become the world's most valuable—potentially matching the combined value of the second to sixth largest firms. Musk likened traditional gas-powered cars without autonomous features to horses or antique flip phones—museum pieces of the future.
Autonomous Driving: Robotaxi to Pilot in Austin by June
Musk announced plans to pilot the Robotaxi service in Austin starting in June, expanding to other U.S. cities by year-end. He projected meaningful revenue contribution by mid-to-late 2026.
Tesla uses a general-purpose solution instead of customizing for individual cities. Once approved in one country, rapid nationwide rollout would follow. FSD performance in China, despite strict data rules, proved that Tesla's AI-based solution is on the right track.
In the U.S., Tesla's FSD is highly reliable, capable of safely operating at speeds up to 120 km/h. Musk claimed users can even text safely while driving.
Compared to competitors like Waymo, Tesla's key edge lies in cost—20–25% of Waymo's. Waymo relies on expensive LiDAR and sensors, while Tesla's system is AI-driven. Tesla also manufactures its own cars, unlike Waymo, which retrofits existing vehicles, giving Tesla's Robotaxi greater integration and flexibility.
Supply Chain: Localized Strategy Minimizes Tariff Impact
Tesla has localized supply chains globally, with over 85% localization in the U.S. and 95% in China, making it the EV automaker least affected by tariffs. Tesla also owns the largest lithium refinery outside China, located in South Texas, helping control battery costs.
Although Musk plans to suggest tariff reductions to Donald Trump, final decisions will lie with Trump.
Optimus Robot: Thousands in Factories by Year-End
Musk expects thousands of Optimus humanoid robots to be deployed in Tesla factories by the end of 2025. Annual production could hit one million units by 2029/2030.
Optimus's arms use permanent magnets made in China, but export usage reviews—intended to ensure non-military use—have slowed production.
Energy Storage: Cost Advantage Drives Utility Orders
Tesla's energy storage business benefits from advanced battery tech and a diversified supply chain, offering strong cost advantages. U.S. utilities are placing large orders for Megapack batteries, helping power grids reach a storage scale of 1 gigawatt-hour, with terawatt-level capacity in sight.
However, tariffs pose a challenge. Tesla imports LFP battery cells from China and is working to establish U.S. and alternative supply chains, but this will take time. The tariff impact is limited to the U.S., as other regions rely on Tesla's new China-based mega-factory, which began operations in Q1.
Additional Notes: Cheaper Model Coming in June, India Entry Under Review
Tesla's steering-wheel-less Cybercab is progressing steadily, mainly being produced in its Austin gigafactory—three times the size of the Pentagon.
A cheaper model is planned for launch in June, with quality assured. However, production bottlenecks may arise in the short term. Tesla will maximize use of existing facilities and not build new factories.
Tesla is evaluating entry into India, but the biggest hurdle is the country's combined 100% import duty—70% base tariff plus 30% luxury tax—doubling the car's landed cost.
Trump's proposed retaliatory tariffs may affect Tesla's capital investments, especially since Tesla must import production equipment due to limited U.S. capacity. Much of that equipment is manufactured in China, making it vulnerable to tariffs. Thus, Tesla's business faces short-term headwinds from both tariffs and reputational concerns.
