Tesla's Revenue Drops 16% as Policy Shifts, Competition Bite

Tesla's second-quarter financial report showed a decline in both revenue and earnings, marking the second consecutive quarter of deterioration in its core financial metrics. The company's total revenue for the quarter decreased by 16% year-over-year to 225 billion dollars, falling short of analysts' expectations of 227.4 billion dollars. The adjusted earnings per share stood at 40 cents, which also failed to meet market expectations of 43 cents. The decline in revenue was primarily driven by a decrease in the automotive segment, which saw revenue drop from 199 billion dollars in the same period last year to 167 billion dollars. The reduction in regulatory credit sales, which fell from 8.9 billion dollars to 4.39 billion dollars, was a significant factor in the overall revenue decline.

The company's chief financial officer further exacerbated market concerns by revealing that a recently passed law in the United States would eliminate the 7500 dollar federal tax credit for electric vehicles by the end of the third quarter. This policy change is expected to directly impact Tesla's business. Additionally, the company is adjusting its supply chain to comply with tariff policies implemented by the previous administration. The chief financial officer warned that due to sudden changes in the supply chain, vehicle supply in the U.S. market for the current quarter is limited, and there is uncertainty regarding the delivery of orders placed after August 8. Consumers with immediate purchasing needs are advised to place their orders as soon as possible.

Tesla's net profit for the second quarter decreased from 14 billion dollars (40 cents per share) in the same period last year to 11.7 billion dollars (33 cents per share). The company delivered 384,000 electric vehicles globally in the second quarter, a 14% decrease year-over-year. Although Tesla does not explicitly define "deliveries" as final sales, this metric is widely regarded as the closest indicator of actual sales performance.

Part of the performance pressure can be attributed to resistance in the U.S. and European markets. The CEO's recent political involvement, including supporting the re-election of the previous administration and backing a far-right political party in Germany, has sparked negative reactions from some consumers and institutions. Despite these challenges, Tesla continues to push forward with new product launches. The company announced at its annual shareholder meeting that a more affordable vehicle model began production in June, with plans for mass production by the second half of 2025. However, the production of this model, previously referred to as the "Model 2," has been delayed multiple times. Competitors in China are rapidly introducing affordable electric vehicles with advanced autonomous driving capabilities, posing direct competition to Tesla.

During the earnings call, the CEO reiterated Tesla's future focus on autonomous ride-hailing and humanoid robots. The CEO described the autonomous ride-hailing service as a "money-making tool" for vehicle owners, allowing them to earn income while the car is in use. The humanoid robot, Optimus, is envisioned as a potential worker in factories or a helper in households. Currently, Tesla is testing a limited autonomous ride-hailing service in Austin, Texas, with safety drivers on board and access restricted to specific users. The company plans to expand the service area and gradually remove safety drivers, although progress has been slower than that of competitors like Waymo, which already operates commercial autonomous ride-hailing services in multiple locations, including Austin.

Despite regulatory hurdles, the CEO expressed confidence that the technology for autonomous ride-hailing could cover 50% of the U.S. population by the end of the year, pending regulatory approval. However, the CEO had previously underestimated the regulatory challenges a year ago. In other business segments, Tesla's service and other divisions, which include charging services, saw a 17% year-over-year increase in gross profit, primarily due to increased sales of Supercharger stations. The company added over 2,900 new Supercharger stations during the quarter, bringing the total to 7,377. Additionally, Tesla's digital asset holdings grew from 7.22 billion dollars a year ago to 12.4 billion dollars.

Overall, Tesla faces multiple challenges, including policy changes in key markets, intensified competition, delays in new product launches, and regulatory uncertainties. While the CEO has outlined a vision for the future centered on autonomous driving and robotics, the company must address short-term performance pressures and market skepticism to ensure long-term success.