Tesla's Q1 performance "disaster", with sharp declines of 40% far inferior to expectations, and low-priced cars are still planned to be produced in the first half of the year | Financial News

Abstract: Tesla's revenue fell by 9% in the first quarter, with EPS falling by more than 60% lower than analysts' expectations, and automobile revenue fell by 20%; energy storage business remains strong, with deployed installations increasing by 154%, and Powerwall installed capacity hitting new highs for four consecutive quarters, but Tesla pointed out that the impact of the tariff situation on the energy business exceeds that of automobiles. Tesla no longer expects car delivery to return to growth this year, saying that the second quarter report has updated this year's guidance, and changes in trade policies and political sentiment may seriously affect the company's product demand in the short term. The stock price once fell by more than 1% after the session and then turned higher. After Musk's speech, it rose by more than 5% after the session. Tesla long analysts said that stock performance depends on how long Musk will "participate in politics".

In the first quarter when the Trump administration ignited the tariff war, due to the poor performance of its main business, automobiles, Tesla's profit and revenue both fell far short of Wall Street's expectations, and it was called a disaster by the well-known Tesla bullish analyst Dan Ives.

Tesla shifted the blame for the decline in performance to the "uncertainty" of the government's trade policy. In the financial report, unlike in the fourth-quarter report where it was expected that this year's car deliveries would return to growth after last year's decline, it said that the second-quarter report would update this year's guidance. However, Tesla also had bright spots: the energy storage business still grew strongly, and it expected an increase in energy storage demand, reiterating its plan to produce new cars, including low-priced cars, in the first half of the year.

When commenting, Dan Ives, an analyst at Wedbush Securities, reiterated that the performance of Tesla's stock would depend on how long CEO Elon Musk served in the Trump administration. He believed that if Musk did not withdraw but continued to "participate in politics", Tesla's stock would face a "negative impact" because the damage to the Tesla brand might continue to deteriorate.

During the earnings conference call, Musk hinted that next month he would no longer devote a lot of energy to the "Department of Government Efficiency" (DOGE) of the Trump administration and would spend more time on Tesla. This relieved investors who were worried that Musk's excessive participation in political activities would affect Tesla's performance and prospects, and boosted Tesla's stock price to rise sharply after hours.

After the financial report was released, Tesla's stock price, which had risen more than 1% after hours, quickly turned down and once fell more than 1%. Later, it turned up again. As U.S. President Trump said after hours that he had no intention of removing Federal Reserve Chairman Jerome Powell, U.S. stock index futures generally rose, and Tesla's after-hours stock price increase expanded to more than 3%. After Musk mentioned reducing the time spent on DOGE work, Tesla's stock price rose further after hours and is currently up more than 5%.

After the U.S. stock market closed on Tuesday, April 22 (Eastern Time), Tesla announced its financial results for the first quarter of 2025.

1) Main financial data

Revenue: In the first quarter, Tesla's operating revenue was $19.34 billion, a year-on-year decrease of 9%. Analysts expected $21.37 billion, and in the fourth quarter, it increased by 2% year-on-year.

EPS: In the first quarter, the adjusted earnings per share (EPS) under the non-GAAP standard was $0.17, a year-on-year decrease of 40%. Analysts expected $0.43, and in the fourth quarter, it increased by 3% year-on-year.

Operating profit: In the first quarter, the operating profit was $399 million, a year-on-year decrease of 66%. Analysts expected $1.13 billion, and in the fourth quarter, it decreased by 23% year-on-year.

Net profit: In the first quarter, the adjusted net profit was $934 million, a year-on-year decrease of 39%. In the fourth quarter, it decreased by 71% year-on-year.

Profit margin: The operating profit margin in the first quarter was 2.1%, compared with 6.2% in the fourth quarter and 5.5% a year ago; the gross profit margin in the first quarter was 16.3%, the same as in the fourth quarter, a decrease of 104 basis points compared with a year ago. Analysts expected 16.1%.

Capital expenditure: In the first quarter, the capital expenditure was $1.492 billion, a year-on-year decrease of 46%. Analysts expected $2.49 billion, and in the fourth quarter, it increased by 21% year-on-year.

Free cash flow: In the first quarter, the free cash flow was $664 million, a year-on-year increase of 126%. Analysts expected $1.08 billion, and in the fourth quarter, it decreased by 1.6% year-on-year.

2) Segment business data

Automobiles: In the first quarter, the automobile revenue was $14 billion, a year-on-year decrease of 20%. In the fourth quarter, it decreased by 8% year-on-year. The gross profit margin of the automobile business excluding regulatory credit points was 12.5%, and analysts expected 11.9%. In the fourth quarter, it was 13.6%.

Energy storage: In the first quarter, the revenue from energy production and storage was $2.638 billion, a year-on-year increase of 67%. In the fourth quarter, it increased by 113% year-on-year.

Revenue in the first quarter decreased by 9% instead of increasing, and EPS was more than 60% lower than expected, and automobile revenue decreased by 20%

The financial report shows that in the first quarter, Tesla's revenue recorded its first year-on-year decline since the first quarter of 2020, 9.5% lower than the total revenue expected by analysts. In other words, analysts expected a slight year-on-year increase in the first quarter.

In the first quarter, Tesla's EPS profit was also far lower than expected, 60.5% lower than the level expected by analysts. Analysts expected EPS to decrease by 4.4% year-on-year, while Tesla announced a 40% decrease in EPS.

Under the GAAP standard in the first quarter, that is, before adjustment, Tesla's net profit was $409 million, a year-on-year decrease of 71%, much higher than the adjusted decrease of 39%.

The decline in Tesla's revenue in the first quarter was due to a 20% decrease in the revenue of its automobile business in the quarter, which dropped to the lowest level since the third quarter of 2021. If the "carbon credit" revenue of $595 million from regulatory credit points is excluded, Tesla's revenue from selling cars in the first quarter would be even lower. However, the decline in the gross profit margin of the automobile business was not as severe as analysts expected.

Tesla said that the decline in sales in the first quarter was partly due to the production line upgrade of the Model Y model at all four of its automobile production plants, resulting in a decrease in automobile deliveries; automobile price cuts and sales subsidies; and the negative impact of the depreciation of the U.S. dollar on foreign exchange rates, which was $200 million.

In fact, in addition to the production line upgrade of the Model Y, the impact of Musk's involvement that led to Tesla being boycotted in the first quarter cannot be ignored.

Last month, Wall Street News mentioned more than once that since Trump took office, violent and destructive acts against Tesla have occurred frequently, such as charging stations being burned, showrooms being shot at, and car owners being humiliated. There was also a global "Bring Down Tesla" protest action, which was directly aimed at Musk. Affected by this, Tesla's sales in many European countries have decreased sharply by double digits. Analysts warned that the politicization of Tesla poses a serious threat to the brand.

The delivery volume of Tesla announced at the beginning of this month also partly confirmed the destructiveness of Musk's "participation in politics" to some extent. The delivery volume in the quarter decreased by 13% year-on-year to 336,681 vehicles, a new low in nearly two years, nearly 14% lower than the level expected by analysts.

Still plans to start producing new cars, including low-priced cars, in the first half of the year

In the product outlook of the financial report, Tesla completely copied the statement in the fourth-quarter financial report, saying:

The planned new cars, including more affordable models, are still expected to start production in the first half of 2025. These vehicles will use the next-generation platform and some functions of Tesla's existing platform and will be produced on the same production line as the current vehicle series.

Just like in the fourth-quarter report, this report also expects that the production of the self-driving taxi Cybercab is planned to start in 2026.

The installed capacity of energy storage deployment in the first quarter increased by 154%, and the Powerwall reached a new high for four consecutive quarters

The growth rate of Tesla's energy storage business revenue in the first quarter slowed down compared with that in the fourth quarter, but the double-digit growth rate partly offset the decline in automobile revenue, so that the decline in the company's total revenue did not exceed 10%.

In the fourth quarter of last year, Tesla deployed a record-high 11,000 megawatt-hours (GWh) of battery energy storage products, and the installed capacity increased by 243% year-on-year. In the first quarter, Tesla's installed capacity of battery energy storage deployment reached 10,400 GWh, close to the record set in the fourth quarter, with a year-on-year increase of 154%. Although the growth rate slowed down compared with that in the fourth quarter, it was still higher than the annual growth rate of 113% last year.

Tesla said that the installed capacity of the Powerwall product in the energy storage business reached a new single-quarter high for the fourth consecutive quarter. In the first quarter, the installed capacity of the Powerwall exceeded 1 GWh for the first time in the company's history, and the supply continued to be limited.

Changes in trade policies and political sentiment may seriously affect the demand for the company's products in the short term

At the beginning of the financial report, Tesla emphasized the impact of the "uncertainty" of trade policies and hinted that the political sentiment triggered by the Trump administration's tariffs would hit the market demand for Tesla's products. The report reads:

"Due to the rapid changes in trade policies that have an adverse impact on Tesla's and its peers' global supply chains and cost structures, the uncertainty in the automobile and energy markets continues to rise. This dynamic, combined with the changing political sentiment, may have a significant impact on the demand for our products in the short term."

The report also admitted that the Trump administration's tariff policy has an even greater impact on Tesla's energy business than on its automobile business. The report said:

"Although the current tariff situation has a relatively greater impact on our energy business than on our automobile business, we are taking actions to stabilize the business in the medium and long term and focus on maintaining the health of the business."

In the performance outlook part of the report, Tesla once again mentioned the negative impact of trade policies and deleted the sentence "We expect the automobile business to return to growth in 2025" in the fourth-quarter financial report. It no longer expects the car delivery volume to return to positive growth this year, reiterating that the company's performance growth will depend on various factors, including the macro environment, and said that it will update this year's performance guidance when releasing the second-quarter financial report.

The report reads:

"It is difficult to measure the impact of changes in global trade policies on the automobile and energy supply chains, our cost structure, and the demand for durable goods and related services. We are making prudent investments to prepare for the growth of the automobile and energy businesses, but the growth rate this year will depend on various factors, including the acceleration of our autonomous driving business, the increase in factory output, and the broader macroeconomic environment. We will review the performance guidance for 2025 in the second-quarter financial report update."

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