Tesla Inc. CEO, Elon Musk, has warned that the company is entering a challenging period. This comes as federal EV credits wind down and tariff-related headwinds begin to mount.
What Happened
During the company’s second quarter earnings call, Musk stated that Tesla could face a few rough quarters, specifically mentioning the fourth quarter of 2025 and the first and second quarters of 2026.
Challenges Ahead
The company is facing several challenges, including:
- The expiration of the $7,500 federal EV tax credit for many of its models
- Tariffs imposed by President Donald Trump, which have increased costs by approximately $300 million from the prior quarter
- Two-thirds of the tariff impact was seen in the company’s automotives business, with less impact in energy
According to the company’s CFO, Vaibhav Taneja, “Given the latency in manufacturing and sales, the full impacts will come through in the following quarters. So costs will increase in the near term.”
Autonomy Play
Despite these concerns, Musk remains optimistic about Tesla’s autonomy play. He stated, “Once you get to autonomy at scale in the second half of next year… I’d be surprised if Tesla’s economics are not very compelling.”
Impact of EV Tax Credits
According to senior analyst Dan Ives of Wedbush Securities, the axing of the EV tax credits would be a net positive for Tesla. Ives stated, “While this is a clear negative for the EV industry at first look and would particularly hurt GM, Ford, Stellantis, and Rivian… on the flip side, we view this as a net bullish move for Tesla and Musk over time.”
Second Quarter Results
Tesla released its second quarter results, reporting $22.5 billion in sales, an increase of 12% year-over-year, but falling short of consensus estimates at $22.8 billion. The company posted a profit of $0.40 per share, which again missed analyst consensus estimates at $0.42 per share during the quarter.
Price Action
Tesla shares were up 0.14% on the day of the earnings release, trading at $332.56, but were down 5.51% after hours.
Stock Performance
According to stock rankings, Tesla shares score high on Growth and have a favorable price trend in the short, medium, and long term.