Tesla stock plunges as Elon Musk warns company may face ‘a few rough quarters’ ahead
Tesla CEO Elon Musk insisted that robotaxis will save the struggling automaker after it posted its worst sales drop in a decade — but investors weren’t buying it, sending its stock tumbling as much as 10% Thursday.
Musk predicted the autonomous cabs — rolled out in Austin, Texas, earlier this month — will pull the pioneering electric vehicle maker out of its funk by next summer after it reported plunging sales in the second quarter.
“Once you get to autonomy at scale in the second half of next year, I’d be surprised if Tesla Inc.’s economics are not very compelling,” Musk said on an earnings call Wednesday.
Musk said the robotaxi service will soon expand to San Francisco. Other markets eyed for expansion include Nevada, Florida and Arizona.
“We’ll probably have autonomous ride-hailing in about half the population of the US by the end of (2026),” the world’s richest person said. “That’s at least our goal, subject to regulatory approvals.”
Musk also pointed to Tesla’s Optimus humanoid robots as key to the company’s future.
Wedbush analyst Dan Ives struck a bullish tone in his note to clients despite Tesla’s weak sales.
“As we have discussed, there are still headwinds, tariffs, and clear growth challenges for Tesla over the coming 3-6 months…but Musk now entering the picture as a wartime CEO to put TSLA on an aggressive AI-focused strategy represents the biggest and best possible news for Tesla investors,” Ives said.
The company reported that revenue from car sales fell 16% to $16.7 billion in the second quarter versus a year ago – its second straight quarter of declining sales.
It also missed Wall Street’s quarterly estimates for both earnings per share and overall revenue.
Executives blamed the impact of tariffs as well as the upcoming end of federal electric vehicle tax credits – which reportedly sparked Musk’s public falling-out with President Trump – as a key factor in the sales downturn.
However, Trump seemingly extended an olive branch to his former “first buddy” Thursday, denying reports that wanted to “destroy Elon’s companies” by taking away his federal subsidies.
“I want Elon, and all businesses within our Country, to THRIVE,” Trump wrote on Truth Social.
“The better they do, the better the USA does, and that’s good for all of us.”
Tesla stock pared some of its early losses, closing down 8.2%, to $305.30 a share.
The Trump-backed Big Beautiful Bill eliminated the $7,500 tax credits that have long bolstered Tesla’s sales pitch to customers.
The loss of tax credits is just part of the problem for Tesla. Analysts have cited rising competition in Europe and China from Chinese automaker BYD and other rivals, as well as Tesla’s aging car lineup and brand damage caused by Musk’s work with the Department of Government Efficiency.
“We probably could have a few rough quarters,” Musk admitted during the company’s earnings call. “I’m not saying that we will, but we could.”
Musk said the negative trend could extend into “Q4, Q1, maybe Q2,” or the end of this year and the first half of 2026 – before improving in the second half of next year.
In second-quarter results released Wednesday, the company reported adjusted earnings of 40 cents a share, less than the 43 cents expected by analysts. Overall revenue came in at $22.50 billion, or less than an expected $22.74 billion.
Last month, Tesla said it expected a 14% year-over-year decline in vehicle deliveries to 384,000 for the second quarter. Deliveries are seen as a close proxy for sales.
While Musk has vowed to spend more time at Tesla since stepping back from DOGE, there are signs that he will remain involved in politics.
The Tesla boss has vowed to form an “America Party” after stating that neither Democrats nor Republicans are meeting the public’s needs.