Tesla stock plunges as Elon Musk warns company may face ‘a few rough quarters’ ahead

Tesla shares plunged as much as 10% in early trading Thursday after the company posted its steepest sales drop in more than a decade – and CEO Elon Musk warned the slump may not end anytime soon.

The embattled electric carmaker 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. Tesla also missed Wall Street’s quarterly estimates for both earnings per share and overall revenue.

“We probably could have a few rough quarters,” Musk admitted during the company’s earnings call on Wednesday. “I’m not saying that we will, but we could.”

Tesla 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.

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 as Tesla rolls out an expanded “Robotaxi” autonomous driving service.

“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.

“We’ll probably have autonomous ride-hailing in about half the population of the US by the end of the year,” Musk added at another point in the call. “That’s at least our goal, subject to regulatory approvals.”

The Trump-backed Big Beautiful Bill eliminated the $7,500 tax credits that have long bolstered Tesla’s sales pitch to customers.

Musk, who had worked closely with Trump during and after the 2024 election, had warned that the legislation would explode the federal deficit. Trump claimed that Musk was upset about its elimination of tax credits, which the billionaire denied.

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.

Tesla’s stock is down 20% since the start of the 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.

Musk has pointed to Robotaxi, which began a pilot run in Austin, Texas last month, as well as Tesla’s Optimus humanoid robots as key to the company’s future.

The company also opened at Tesla Diner in Hollywood this week, with Musk pledging to expand to more locations if it proved successful.

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.

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.