Tesla Profit Falls 71% as Musk Shifts Focus

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Tesla Profit Falls 71% as Musk Shifts Focus \ Newslooks \ Washington DC \ Mary Sidiqi \ Evening Edition \ Tesla reported a steep 71% drop in first-quarter profit, triggering Elon Musk’s pledge to dedicate more time to the company starting in May. Investors have criticized Musk’s political distractions, including his federal advisory role under President Trump. Tesla also warned of future challenges from tariffs and international backlash.

Quick Looks

Tesla’s Q1 profit plunged 71% to $409 million, well below forecasts.
Elon Musk says he’ll refocus on Tesla starting in May 2024.
Tesla’s revenue dropped 9% to $19.3 billion, also missing Wall Street expectations.
Investors blame Musk’s distraction with Trump’s Department of Government Efficiency (DOGE).
Tesla plans to release a cheaper Model Y and launch its autonomous robotaxi service this year.
Tariffs and international backlash, especially in China and Europe, are pressuring demand.
Despite falling profit, Tesla generated $2.2 billion in operating cash, up from last year.
Regulatory credit sales rose to $595 million, softening the earnings hit.

Deep Look

Elon Musk announced Tuesday he will renew his focus on Tesla starting next month, following one of the company’s worst quarterly earnings performances in recent memory. Tesla reported a 71% drop in first-quarter profit, sending shockwaves through Wall Street and further inflaming investor frustrations over Musk’s growing list of non-Tesla commitments.

In a call with analysts, Musk acknowledged the need to recalibrate his attention and reaffirmed Tesla’s commitment to growth and innovation despite a rapidly shifting automotive landscape.

“This is a big step in the right direction,” said Dan Ives, analyst at Wedbush Securities. “Investors wanted to see him recommit to Tesla.”

Weak Quarter Underscores Broader Challenges

Tesla posted a Q1 profit of $409 million, or 12 cents per share, well below analyst expectations. Revenue fell 9% to $19.3 billion, as global deliveries slowed and consumer sentiment weakened in the face of political backlash and global competition.

For context, Tesla’s gross margins fell to 16.3%, down from 17.4% last quarter, further confirming that cost-cutting alone may not be enough to preserve profitability in a more crowded EV market.

Political Pressure and Public Perception

Much of the recent slump has been attributed to Musk’s controversial role as the head of President Trump’s Department of Government Efficiency (DOGE), a federal body aimed at slashing public sector jobs. The position has drawn harsh criticism, with many Tesla customers and shareholders accusing Musk of being too politically divisive, particularly with his support for far-right European politicians.

The controversy has played out not just in headlines, but in Tesla’s sales, particularly in Europe, where buyer sentiment has cooled significantly.

International Setbacks and Tariff Risks

Tesla also finds itself in the crosshairs of U.S. tariff policies and Chinese retaliation. While it avoids the brunt of import tariffs due to domestic vehicle production, the company does rely on international supply chains for battery materials and other components now subject to import taxes.

Additionally, the company recently halted orders in China for its Model S and Model X, citing regulatory and political roadblocks. These moves follow broader tensions between the U.S. and China, and further complicate Tesla’s growth trajectory in Asia.

Upcoming Product and Tech Plans

Despite the earnings hit, Tesla is still pushing forward with product innovation:

A more affordable Model Y SUV is expected to launch later this year, aimed at regaining market share from price-sensitive buyers.
Musk confirmed that the company will begin rolling out a paid robotaxi service in Austin, Texas this June, with broader deployment in other cities to follow.
He reiterated ambitious goals for autonomous driving, claiming millions of Teslas could be operating driver-free by year-end.

“Can you go to sleep in our cars and wake up at your destination? I’m confident that will be available in many cities in the U.S. by the end of this year,” Musk said.

Bright Spots: Cash Flow and Credit Sales

Not everything in Tesla’s report was bleak. The company’s operating cash flow soared to $2.2 billion, compared to just $242 million a year earlier. This offers some breathing room as it invests in new models, infrastructure, and AI.

Additionally, regulatory credit sales—a longstanding but controversial income source—hit $595 million, up from $442 million last year. These credits, sold to automakers who fail to meet emissions requirements, continue to act as a financial buffer.

“They’re not particularly surprising given that deliveries were down,” said Seth Goldstein, analyst at Morningstar. “But it was good to see positive cash flow.”

What’s Next for Tesla?

Musk will officially shift focus back to Tesla starting in May, easing investor concerns.
Tesla will attempt to stabilize its energy storage business, which is more sensitive to tariff shocks.
Autonomous driving milestones, including the robotaxi rollout, will be closely watched.
The company must repair international brand perception, particularly in Europe and China.
Wall Street will look for signs of delivery growth, margin recovery, and CEO engagement in upcoming quarters.

Tesla’s status as a dominant EV player is being tested like never before. Musk’s renewed leadership comes at a critical moment—and the pressure is mounting to deliver.