Tesla (Nasdaq: TSLA) woke up to a cold shower on Thursday morning, with its shares opening down 9.5% from the prior day’s close and hitting a low of $301 during intraday trading. If you are wondering what sent the usually resilient stock tumbling, the answer begins with a turbulent earnings report and extends to a range of sore spots investors simply could not ignore.
The drama kicked off after the bell on Wednesday, when Tesla pulled back the curtain on a second quarter that managed to disappoint even those braced for lackluster news. The electric vehicle giant reported revenue of $22.5 billion, missing Wall Street consensus by $140 million and marking a painful 12% drop from the same quarter last year. Profits did not hold up either, with net income sliding 16% year-on-year to $1.2 billion.
The real damage, however, came not from these numbers alone but from CEO Elon Musk’s blunt tone on the earnings call and fresh questions swirling around the company’s future. Musk admitted that Tesla’s growth projections for 2025 were off the table and set expectations for some tough quarters ahead, with no sugar-coating or dazzling detours into new tech promises. He warned investors to brace themselves for a patchy path forward, mainly due to slowing demand, vanishing incentives for electric vehicles in key markets, and rising competition from both established and upstart automakers.
After spending years as the poster child for American innovation, Tesla now finds itself grappling with the everyday headaches of maturing industries: thick competition and eking out sales in a market that has started to prefer variety and price over cool factor alone. Newcomers and rivals such as BYD from China have been launching a steady parade of affordable electric cars. Tesla’s product lineup, on the other hand, is starting to look a bit stale to consumers, with few truly new models making a splash in recent quarters.
Cynics might say that Musk’s hope of robotaxis and humanoid robots powering the next wave of company-led transformation looks more like a distant mirage today than ever before. In the latest earnings call, Musk discussed Tesla’s robotaxi project, highlighting a pilot program in Austin, Texas, but revealed little in the way of progress, with only about 7,000 driverless miles logged by the fleet in weeks of operation. In other words, while Tesla is eager to don the badge of an AI and robotics innovator, the company still relies heavily on its car business for meat-and-potatoes revenue. Unfortunately, that car business is shrinking, not swelling.
Wall Street, which had initially been hopeful at the mere stabilization of Tesla’s gross margin at 17.2% (slightly ahead of expectations), was less patient once the conference call concluded without clear future targets or a convincing narrative to hold onto. The market’s reaction was swift and severe, with seasoned Tesla bulls admitting that they, too, were seeking more than Musk offered.
Layered on top of these business woes are Elon Musk’s increasingly public political activities and stances, which have started to alienate potential EV customers in both the United States and Europe. Musk’s recent forays into political debate and his decision to launch a new political party have grated on parts of the consumer base and further complicated Tesla’s image as a global brand for the open-minded and eco-conscious.
To add to the confusion, Tesla has remained vague about scaling up production for a promised cheaper electric vehicle and sidestepped giving updated delivery forecasts, citing the unpredictable economy and shifting regulatory landscape. The company’s revenue from selling regulatory credits, which once helped pad profits, has been slashed nearly in half in the past year, signaling less room to maneuver if core vehicle sales fail to rebound.
For now, the mood around Tesla shares has transformed from exuberant optimism to worried introspection. Investors are recalibrating, wondering if the next big leap in autonomy or AI will come in time to arrest this skid, or if these promises are simply too far off to bet the house on.
