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U.S. electric vehicle (EV) maker Tesla reported a 16% year-over-year drop in second-quarter profit on Thursday, totaling $1.2 billion, as the company prepares for what CEO Elon Musk described as potentially “rough” quarters ahead.
The warning comes in the wake of a newly enacted U.S. fiscal package that eliminates the federal tax credit for electric vehicles (EVs), effective Sept. 30.
The $7,500 EV tax incentive was among several green subsidies terminated under President Donald Trump’s sweeping budget legislation approved earlier this month. On an earnings call with investors, Musk suggested the company’s financial performance may deteriorate in the short term before recovering through autonomous transport ventures.
Tesla’s quarterly revenues declined 12% year-over-year to $22.5 billion due to weaker auto deliveries, lower average selling prices, and rising research and development expenses—particularly in artificial intelligence and robotics.
This marks Tesla’s third consecutive quarter of declining profitability, amid growing competition in the EV market and public backlash tied to Musk’s political affiliations.
The company withheld full-year vehicle production guidance, citing macroeconomic uncertainty, evolving trade dynamics, and internal factors such as the pace of autonomy efforts and production ramp-ups at its manufacturing facilities.
Musk’s relationship with Trump has soured in recent months. After donating heavily to Trump’s 2024 campaign and briefly serving in the administration, Musk exited his post as head of the newly formed “Department of Government Efficiency” in May.
Subsequent legislation under Trump’s leadership, including the termination of the EV tax credit, has drawn sharp criticism from Musk, who warned the fiscal package could bankrupt the U.S.
Earlier this month, Musk announced the formation of a new political entity, the “America Party,” prompting Trump to publicly ridicule the move and threaten punitive actions, including deportation and the cancellation of federal contracts with Musk-led companies.
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