Tesla Warns of ‘Rough Quarters’ Ahead Amid Shifting EV Policies

Elon Musk may have left the White House, but the billionaire hasn’t been able to completely tune out the Trump administration—at least not when it comes to Tesla. The U.S. government’s policies on electric vehicle subsidies and auto tariffs will likely culminate in a “few rough quarters” for the carmaker, warned Musk during Tesla’s quarterly earnings calls yesterday (July 23), where the billionaire laid out a plan to turn his struggling company’s fortunes around with the help of autonomous vehicles and robots.

Grappling with a surge in competition and political backlash from customers and investors alike, Tesla’s shares have plummeted by 20 percent in 2025 and fell by 9 percent today after the electric vehicle (EV) company missed Wall Street’s expectations on both revenue and profit for the April-June quarter. Tesla’s quarterly sales declined by 12 percent year-over-year to $22.5 billion, while its net income came in at $1.4 billion compared to $1.8 billion last year.

Tesla’s revenue is typically bolstered by sales of regulatory credits, which traditional carmakers acquire from EV companies in order to avoid hefty federal fines for falling short of emissions standards. Such financial penalties, however, will be removed under U.S. President Donald Trump’s recently passed spending bill—spelling trouble for Tesla. The company’s credits sales have already started to decline, falling 50 percent year-over-year during the second quarter to $439 million. “The One Big [Beautiful] Bill has a lot of changes that would affect our business in the near term,” Vaibhav Taneja, Tesla’s chief financial officer, told analysts.

Beyond eliminating emission penalties, Trump’s bill will abolish tax credits of up to $7,500 for EV purchases. Given that the tax break will be repealed by the end of September, those interested in acquiring a Tesla should “place your order now,” warned Taneja.

Musk’s company is also gearing up for a financial hit from the Trump administration’s auto levies. Although it has largely escaped tariffs on imported cars due to its domestic manufacturing, Tesla, like all car companies, is suffering from levies on imported vehicle parts. “While we are doing our best to manage these impacts, we are in an unpredictable environment on the tariff front,” said Taneja, who noted that Tesla faced $300 million in tariff-related costs between April and June.

Despite having played a prominent role leading the government’s cost-cutting Department of Government Efficiency (DOGE), Musk publicly broke with Trump earlier this year and has since become a vocal proponent of the president’s bill. But his political entanglements have had lasting repercussions for Tesla, alienating some EV customers and causing major investors to criticize Musk’s leadership in light of his external distractions.

This sentiment, in combination with EV rivals like BYD gaining ground across Tesla’s largest markets, has infiltrated the company’s sales. Tesla saw its vehicle deliveries fall between April and June for the second consecutive quarter, while its sales in Europe have followed a similarly downwards trajectory in recent months. Its presence in China, too, has been marked by cooling revenue.

Musk has attributed this decline in part to barriers standing in the way of Tesla’s autonomous vision. The company last month launched its first batch of self-driving Teslas in Austin, Texas, inviting a select group of analysts and social media influencers to test out its robotaxis. Pending regulatory approval, the EV company is hoping to introduce autonomous rides to half of the U.S. population by the end of 2025, said Musk. For the time being, regulatory hurdles in Europe and China are preventing similar expansion plans, noted the CEO, who claimed that sales in both regions will improve once such impediments are overcome.

Tesla has increasingly framed its future as one defined by self-driving robotaxis and humanoid robots. If executed properly, these ventures will give Tesla “a shot at being the most valuable company in the world,” Musk told analysts. In addition to rapidly expanding its robotaxi footprint, Tesla hopes to eventually produce 100,000 of its Optimus robots on a monthly basis in five years’ time, according to the billionaire, who pointed to such plans as evidence that Tesla will prevail through the challenging quarters looming ahead. “Once you get to autonomy at scale in the second half of next year, certainly by the end of next year, I would be surprised if Tesla’s economics are not very compelling,” he said.