Tesla’s Profit Slide Continues Amid Weak Sales and Stiff Competition

Tesla posted its third straight quarterly profit decline, as aggressive price cuts aimed at boosting demand failed to offset weakening sales. The company reported a second-quarter net income of $1.2 billion, a decline from $1.4 billion a year earlier, with revenue slipping to $22.5 billion from $25.5 billion.

The company’s sales struggles come amid intensifying competition and a stagnant product lineup. Tesla has failed to maintain momentum while rivals like China’s BYD continue to release new, competitively priced models. The highly anticipated Cybertruck has underperformed, with second-quarter sales declining 50% from the same period a year earlier to just 4,300 units. Tesla also missed its target to launch a more affordable vehicle by the end of June, though it confirmed limited production began last month, with broader availability expected by year-end.

Globally, the electric vehicle market is still expanding—but Tesla is losing ground. In the first half of 2025, electric vehicle sales rose 1.5% in the U.S., compared to 32% in China and 26% in Europe. In the latter market, Tesla’s sales dropped 33%, allowing Volkswagen to reclaim the top spot for electric vehicle sales, according to JATO Dynamics.

Tesla remains heavily reliant on its core vehicle business to fund its broader ambitions. Despite limited financial returns so far, the company continues to invest in technologies like robotaxis and humanoid robots. Tesla has rolled out a test self-driving taxi service in Austin and plans to expand it to San Francisco and additional cities. However, these initiatives aren’t yet bringing in meaningful revenue, and Tesla acknowledged that short-term financial performance could remain uneven as it scales these efforts.

Economic and policy headwinds have added further pressure. Like several other automakers, Tesla pointed to a volatile economic climate shaped by fluctuating tariffs and evolving fiscal policies. Although it builds all U.S.-sold cars domestically, the company still imports components and raw materials that are subject to new tariffs.

Legislation passed by Republicans this month will also eliminate a federal tax credit of up to $7,500 on EV purchases after September, raising costs for many Tesla buyers. In addition, the law removed penalties for failing to meet emissions standards—hurting Tesla’s clean air credit sales, which fell to $439 million this quarter from $890 million a year earlier.

Tesla’s stock remained mostly unchanged following the earnings release, though shares have surged roughly 50% since April. Much of that momentum is tied to investor belief in Tesla’s long-term tech roadmap, despite concerns about its weakening vehicle business.

Adding to the uncertainty is Elon Musk’s growing political involvement, including plans to start a new U.S. political party following a fallout with former President Trump. Some analysts worry this public positioning may be alienating parts of Tesla’s customer base, particularly in the U.S. and Europe.

Musk, who owns 13% of the company, also hinted that he wants to increase his stake. He noted that his influence at Tesla could be limited by activist shareholders and suggested the issue be addressed at the next shareholder meeting.

Tesla faces mounting pressure to deliver results as competition intensifies and policy shifts raise costs. The success of its upcoming affordable model and progress in autonomous tech will be key to regaining momentum and sustaining investor confidence in the months ahead.