Tesla’s (TSLA) first-quarter earnings report was less about profits and more about pivots. The automaker and its CEO, Elon Musk, didn’t want to talk as much about the numbers — maybe for good reason — as much as they wanted to talk about the future.
Investors may have been hoping for answers about falling demand, increased competition, and EV price wars, but they instead heard Musk talk about a future where Tesla wasn’t primarily a car company. He touted the firm’s energy division — a sort of side business, as things stand now — and looked to a future in which Tesla’s factories are powered by robots.
And, of course, Musk talked about two things top of mind for investors: his much-maligned role in the Department of Government Efficiency (DOGE) and the impact tariffs will have on the company’s business.
Here are some of the key takeaways from the company’s earnings report as investors look to Tesla’s winding road ahead.
Musk gets the message after DOGE ‘blowback’
The first thing Musk talked about on Tuesday’s earnings call actually had nothing to do with Tesla and everything to do with his role in the Trump administration’s Department of Government Efficiency.
Musk told investors that he would scale back his role in DOGE — which has slashed the federal employee workforce, among other drastic cost-cutting maneuvers — to a day or two a week starting sometime next month, or as much as President Donald Trump wants him around. The timing is fortuitous: Musk is a special government employee, which means he’s subject to specific ethics rules and can only work 130 days or fewer during a year.
Tesla’s stock soared after Musk’s announcement that he’d be recommitting himself to his CEO role.
Wedbush Securities analyst Dan Ives said in an analyst note that this was a “turning point” for the automaker as the CEO looks to “turn the corner from this dark chapter.” Ives wrote that this move was an off-ramp “out of the Trump White House in our view as the global brand damage, political firestorm, and perfect storm chaos over the past few months” will come to an end.
Musk’s affiliation with Trump and far-right politics has sent Tesla’s reputation cratering. Sales are down of both new and used cars; protestors are targeting the company’s vehicles and facilities; and other brands are leapfrogging Tesla in sales numbers.
So Musk’s move to create distance from the president was much needed for the automaker, though its reputation might never fully recover.
A brutal earnings report across the board
Tuesday’s first-quarter earnings report almost seems to have been buried by all the Musk-related hoopla, and the EV maker is probably OK with that. Because earnings were bad. Very bad.
Tesla’s Q1 revenue was the lowest the company has seen in three years — $19.3 billion, which was down 9% compared with the same period last year. The company reported that net income sank 71%, and its earnings were a double miss in both adjusted earnings-per-share and revenue.
Total auto revenue fell 20% year-over-year during the period.
It’s hard not to point to buyers’ negative associations with Musk as a cause, although Tesla’s earnings report didn’t mention the CEO once. Instead, Tesla said the drop in profits was a result of factory retooling needed to make a revamped version of its popular Model Y SUV, along with price cuts and sales incentives that put the brakes on the company’s revenue.
Immediately after the earnings release, Tesla’s stock was up just 1%, its smallest post-earnings bump since October 2020.
Tesla left a return-to-growth forecast out of its earnings report, saying it would revisit its 2025 guidance in a Q2 update.
“It is difficult to measure the impacts of shifting global trade policy on the automotive and energy supply chains, our cost structure and demand for durable goods and related services,” Tesla said in its earnings release. “While we are making prudent investments that will set up both our vehicle and energy businesses for growth, the rate of growth this year will depend on a variety of factors, including the rate of acceleration of our autonomy efforts, production ramp at our factories and the broader macroeconomic environment.”
Bracing for tariffs
The “variety of factors” Tesla alluded to in its earnings report include Trump’s tariffs — and the resulting trade war fallout.
Trump slapped a 25% tariff on auto imports — on top of 10% universal tariffs and levies on auto parts still to come in early May. While Tesla is less exposed to tariffs on imported cars because it manufactures the vehicles it sells in the U.S. in Texas and California, the company relies on other countries for its parts. Mexico supplies more than 20% of the automaker’s parts.
On Tuesday’s call, Musk said Tesla is in a relatively good spot compared with other U.S. automakers because of its “localized supply chains.” He said Tesla is the “least-affected car company with respect to tariffs, at least in most respects” and referred to Tesla as the most “vertically integrated car company.”
Musk has previously been a vocal critic of the Trump administration’s tariff policies and referred to Peter Navarro, one of the plan’s architects, as “dumber than a sack of bricks.”
On Tuesday, Musk distanced himself from the administration on its trade plan.
“The tariff decision is entirely up to the President of the United States,” he said. “I will weigh in with my advice. I’ve been on the record many times saying lower tariffs are a good idea for prosperity. I’ll continue to advocate for lower tariffs rather than higher tariffs. That’s all I can do.”
He added, “[Trump] will listen to my advice. But then it’s up to him, of course, to make his decision.”
While Tesla may be in a better tariff position than most automakers, the company faces heavy tariffs on one of the bright spots on its earnings report: its energy business, which grew 67% last quarter. Musk said that wing of the company faces an “outsized” impact from the tariffs because it sources the lithium iron phosphate (LFP) battery cells for its Megapack batteries from China.
“We’re in the process of commissioning equipment for the local manufacturing of LFP battery cells in the U.S.,” he said, but added that Tesla can “only serve a fraction of our total installed capacity” with its local equipment.
“We’ve also been working on securing additional supply chain from non-China-based suppliers, but it will take time,” he said.
Musk is all about the robots
Investors had been hoping for some news about how Tesla plans to keep pace with lower-cost Chinese competitors such as BYD (BYDDY), what moves the company is making to keep up with Alphabet’s (GOOGL) Waymo in the robotaxi market, and what the deal is with the Cybertruck.
But what Musk really seemed to want to talk about was Tesla’s robots. The CEO said the humanoid Optimus robots are coming along and he expects the scale-up to be faster than any other of the company’s products — a million units per year in less than five years. Musk claimed there would be thousands of the robots working in Tesla factories by the end of the year.
The company said it plans to begin building the robots on a pilot production in California later this year. Still, Musk warned that China’s new trade restrictions on rare earth magnets is affecting the production of the robots — but the company is working through the issue with Beijing.
Musk promised that the Optimus robots would help produce a time of “sustainable abundance for all.”
“This is a happy future,” he said.