A 2023 Mannequin X sports-utility automobile sits outdoors a Tesla dealership Sunday, June 18, 2023, in Littleton, Colo.
David Zalubowski/AP
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David Zalubowski/AP
Tesla’s revenue dropped 46% 12 months over 12 months, the corporate revealed in its earnings replace Wednesday night.
That was not precisely a shock — in truth, it was higher than most analysts had anticipated. Tesla had already reported gross sales for the quarter, which confirmed the continuation of a droop that stretched by a lot of the 12 months. Extra income from different elements of the corporate, like a rising power storage enterprise, have not made up for the truth that Tesla’s not promoting as many automobiles because it used to.
Tesla, as soon as the undisputed world chief in electrical automobile gross sales, has misplaced that crown as its model repute has soured and competitors — significantly from China — has grown extra intense.
However the firm continues to take care of that it is within the means of transitioning from being a automobile firm to a “bodily AI firm,” with worth based mostly on its self-driving automobile expertise, its robotaxi service and, ultimately, humanoid robots.
As a part of that pivot, Tesla is discontinuing its higher-end Mannequin S and Mannequin X autos. The autos had been already made in a lot smaller numbers than the extra reasonably priced Fashions 3 and Y, however had symbolic worth. The Mannequin S, particularly, was a main step ahead for Tesla and electrical autos; Tesla known as it the “world’s first mass-produced, highway-capable EV,” and it was the primary automobile constructed at Tesla’s Fremont manufacturing unit.
As an alternative of extra conventional autos, the corporate is focusing its consideration on its “Cybercab,” a automobile designed with no steering wheel or pedals that is meant to interchange current Teslas within the firm’s nascent robotaxi enterprise.
“We might count on over time to make way more Cybercabs than all of our different autos mixed,” CEO Elon Musk stated on a quarterly earnings name with buyers and analysts Wednesday night time. “The overwhelming majority of miles traveled will probably be autonomous sooner or later … I am simply guessing, however most likely lower than 5% of miles pushed will probably be the place any person is definitely driving the automobile themselves.”
And as for robots, Tesla is taking the Mannequin S and Mannequin X manufacturing strains within the Fremont plant and dedicating that house to manufacturing of the “Optimus” humanoid robotic, which Musk stated would launch manufacturing this 12 months. (Musk has a historical past, which he usually jokingly refers to, of overpromising on timelines.)
Musk warned Wall Avenue that as a part of these plans, the corporate could be shelling out loads of money within the 12 months forward — an eye-popping $20 billion, greater than double what the corporate spent on capital expenditures in 2025.
“We’re making massive investments for an epic future,” Musk stated.
Tesla misplaced its spot as world’s prime EV vendor
A Chinese language firm, not Tesla, is now the world’s prime EV maker.
In 2025, the Chinese language automaker BYD offered greater than 2.25 million battery-powered autos, based on the corporate.
Tesla offered 1.65 million, fewer than it offered in 2024. It is the second straight 12 months of gross sales declines.
In late 2023, Musk had warned buyers that Tesla was in between “progress waves,” setting expectations low for 2024 however promising a return to speedy enlargement with the launch of a “next-generation” automobile that was tentatively deliberate for 2025.
That second progress wave hasn’t materialized. Tesla repeatedly teased a less expensive Tesla, rumored to promote for about $25,000 because of revolutionary adjustments in manufacturing. Even after Reuters reported that the automobile was lifeless, Musk publicly maintained it was coming.
Nevertheless it wasn’t. Musk ultimately confirmed that the corporate would focus its main redesign efforts on the Cybercab. As an alternative of providing a considerably cheaper automobile, the corporate rolled out barely cheaper variations of the Mannequin 3 and Mannequin Y.
In the meantime, the electrical automobile market within the U.S. has taken a considerable hit. Gross sales had been already underperforming expectations, after which President Trump took workplace and his administration started to systematically roll again EV incentives and laws. Gross sales of EVs rose sharply in the summertime of 2025 as shoppers tried to make the most of a disappearing shopper tax credit score, after which dropped when the tax credit score expired on the finish of September. Automakers say it is nonetheless not clear what demand for EVs will seem like with out these tax credit.
Trump’s coverage adjustments have affected Tesla much more instantly, by taking away a key income stream. Underneath earlier authorities insurance policies, automakers who did not meet necessities for making their autos cleaner may purchase “credit” from opponents who overperformed on constructing EVs, in lieu of paying fines. This was a profitable supply of money for Tesla, and one that’s now dwindling away. Tesla sometimes doesn’t reply to requests for remark, and didn’t reply to an inquiry for this story.
Globally, in the meantime, EVs are nonetheless ascendant. In December, within the European Union, patrons registered extra new pure EVs than conventional gasoline autos for the primary time ever. Hybrids (like the unique Prius) stay extra well-liked than both, however that market is not rising as quick as EVs. In Europe, EV gross sales elevated by greater than 50% year-over-year, whereas these well-liked hybrids rose solely 6%. Conventional gasoline- and diesel-powered automobile gross sales dropped by round 20%.
In China, most new autos are already electrical or plug-in hybrids. And Chinese language exports of EVs are rising, taking off in locations like Mexico and Brazil. Canada, too, simply struck a deal to permit the import of some Chinese language-made EVs with out hefty tariffs.
Along with BYD’s conspicuous success, the key Chinese language automaker Geely has boosted its battery-powered automobile gross sales by 90% 12 months over 12 months, whereas competitor SAIC grew gross sales by 33%.
These figures embrace the gross sales of plug-in hybrids, making them much less of an apples-to-apples comparability to Tesla’s pure electrical gross sales — however in comparison with Tesla’s gross sales decline, the trajectory is evident. Tesla as soon as had the lead within the EV race, however the momentum is now with Chinese language producers.
Model takes a beating
In the meantime, Tesla has been grappling with an more and more skeptical — and even hostile — shopper base within the U.S.
Musk’s controversial political actions over the past few years have alienated many left-of-center People. Whereas he received some followers on the fitting, up to now, Republicans and conservatives stay much less seemingly to purchase EVs.
Evan Roth Smith is a pollster who has been monitoring shopper sentiment about Tesla and EVs for the Electrical Automobile Intelligence Report. In line with his most up-to-date survey of greater than 3,000 U.S. shoppers, practically all automobile manufacturers have an general optimistic repute. Toyota ranks on the prime: Almost half of People have a optimistic view of the Japanese model, and solely 7% have a damaging view. For Tesla, in distinction, 27% have a optimistic view and 37% a damaging view — the corporate has extra haters than followers.
Tesla’s diploma of unpopularity among the many common public could be very uncommon for an automaker, he says: “Most carmakers have no type of political valence or mass controversy connected to them.”
And model perceptions have an effect on gross sales.
Even present Tesla homeowners, who’ve lengthy been remarkably loyal to the model, are displaying a little bit extra curiosity in purchasing round. LexisNexis Threat Options tracks what manufacturers present automobile homeowners buy for his or her subsequent automobile; in the event that they stick to the identical model, that is proof of name loyalty. Of their knowledge, Tesla — which has ranked first or second for trade loyalty lately — has slipped to 3rd place in 2025.
The corporate nonetheless enjoys greater loyalty than the trade common. Nevertheless it’s clear that EV patrons have extra choices now, and even Tesla lovers are extra keen to think about them. In 2020, LexisNexis discovered that amongst current Tesla homeowners who bought one other EV, a exceptional 98% obtained one other Tesla. In 2025, that quantity dropped to 78%.
Musk’s focus is on AI and robots, not automobiles
Musk — who was lately granted an extraordinary pay package deal value as much as a trillion {dollars}, contingent on assembly lofty targets for Tesla’s progress and valuation — has maintained for years that Tesla’s future lies in autonomous autos, synthetic intelligence and humanoid robots.
However he has often missed his personal timelines for these achievements; the driver-assistance software program in Tesla autos nonetheless requires human oversight, and the robotaxi service is barely out there in small pilot packages in Texas and California, regardless of Musk projecting service to 50% of America by the top of 2025.
Roth Smith’s polling has discovered that this continued give attention to autonomy and robotaxis will not be serving to Tesla win over public opinion. The “Full Self-Driving (Supervised)” software program that enables Tesla autos to steer themselves — with human oversight — is central to Musk’s imaginative and prescient for the corporate. Roth Smith’s survey discovered that solely 14% of respondents stated FSD made them extra seemingly to purchase a Tesla; 34% stated it made them much less seemingly.
And out of greater than 20 completely different auto manufacturers that Roth Smith polled shoppers about, the one ones apart from Tesla to have a internet damaging view from the general public had been Cruise, Waymo and Zoox — all autonomous automobile corporations.
“There’s loads of skepticism from shoppers over whether or not this expertise is protected for mass deployment but, whether or not regulators are as much as the duty of making guidelines of the highway for autonomous autos,” Roth Smith says.
By focusing a lot on autonomy, Roth Smith argues, Musk has related Teslas with these controversial robotaxis. “They now are perceived like a way more controversial, far more polarizing sort of expertise,” he says.
