Tesla Q1 2025: Worst Quarter Since 2020

Tesla (NASDAQ: TSLA) has posted its most sobering quarterly results in recent history, revealing the cost of eroding demand, geopolitical headwinds, and an increasingly distracted CEO.

Total revenue declined 9% year-over-year to $19.34 billion, missing Wall Street’s $21.1 billion estimate by a wide margin. Automotive revenue, which remains the core of Tesla’s business, collapsed by 20% to $13.97 billion.

Operating income nosedived 66% year-over-year to $399 million, while operating margin collapsed to a paltry 2.1%—down from 6.2% in the previous quarter.

For Q1 2025, the electric vehicle giant reported a staggering 71% drop in net income, falling to just $409 million, making it the least profitable period since Q1 2021.

At the same time, the company’s adjusted earnings per share came in at $0.27, far below the expected $0.41, while GAAP EPS plummeted to just $0.12. Even the company’s adjusted EBITDA fell 17% to $2.81 billion, with margins deteriorating from 16.9% to 14.6%.

These numbers weren’t salvaged by operational excellence but were propped up by a dramatic 46% slash in capital expenditures, a move that allowed Tesla to report positive free cash flow of $664 million. Without that cutback, the company likely would have posted negative cash flow once again.

Cracks in core markets

Total global deliveries declined 13% from a year earlier, with Model 3 and Y deliveries down 12% and other models, including the Cybertruck and Model S/X, plummeting 24%. Tesla delivered 336,681 vehicles globally, a 13% decline year-over-year, marking the lowest quarterly deliveries since Q2 2022.

This was not an isolated trend. Tesla’s market share in California, its home base and the largest EV market in the US, fell from 56% to 44% within a year. In China, Tesla deliveries dropped 22%, while in Germany—a market once central to Tesla’s European expansion strategy—deliveries sank by an astonishing 62%.

Tesla has attributed some of the shortfall to the production switchover for the new Model Y across four factories.

But analysts remain unconvinced. As Electrek EIC Fred Lambert put it bluntly, “Do not believe him. Tesla’s demand issues are way broader than the Model Y changeover.”

The data supports this view, particularly when one considers that the company refuses to provide regional delivery breakdowns—an omission that increasingly looks strategic.

The political cost

Beyond market dynamics, Elon Musk’s controversial role in US politics has turned into a tangible liability for the brand.

His involvement as the head of President Donald Trump’s Department of Government Efficiency has drawn widespread criticism and sparked protests across the US and Europe. Tesla showrooms and Supercharger stations have been vandalized. Some customers have publicly traded in their Teslas, and sentiment around the brand has shifted sharply in key markets.

On the Q1 earnings call, Musk admitted that he spent a “large slog” of time on government work and would reduce this involvement to 40% of his time starting in May, promising to devote more time to Tesla and his other companies. Still, investors expressed skepticism over whether that shift would be meaningful or sustained.

Tesla’s challenges extend into the geopolitical arena. The company is being squeezed by rising tariffs, particularly those imposed by the US on China-sourced components, which now carry rates as high as 145%. This has forced Tesla to pause some component imports and suspend new orders for its Model S and Model X in China.

The impact is especially acute for Tesla’s energy business, which relies heavily on lithium iron phosphate battery cells imported from China for its Megapack systems.

Tesla admitted that these tariffs will have a disproportionately negative effect on the energy division, even as that segment grew 67% year-over-year to $2.73 billion.

Accounting gymnastics

In previous quarters, the company included mark-to-market Bitcoin gains in its non-GAAP earnings. This quarter, facing a loss on those digital assets, Tesla conveniently changed its reporting to exclude them.

“Beginning in Q1’25, Net income attributable to common stockholders (non-GAAP) is presented net of digital assets gains and losses and all prior periods have been adjusted,” the company noted, adding that all prior periods have been adjusted. For Q4, net income was previously reported at $2.32 billion, now it has been adjusted to $2.11 billion.

Additionally, accounts payable and accrued liabilities rose by over $1 billion, a move some analysts interpret as Tesla delaying payments to suppliers in order to preserve short-term liquidity optics.

Bullish of the future

Despite the bleak fundamentals, Tesla remains committed to its long-term product roadmap. The company reiterated that it is on track to begin production of a lower-cost electric vehicle in the first half of 2025. However, it now concedes that this vehicle will achieve less cost reduction than previously expected, as it will be built on modified existing platforms rather than a brand-new one.

Tesla also confirmed plans to launch its long-teased robotaxi, the Cybercab, in 2026.

But this lack of forward-looking clarity is troubling. Tesla’s Q1 investor letter explicitly acknowledged that changing political sentiment “could have a meaningful impact on demand,” especially as Musk’s public affiliation with the Trump administration continues to generate controversy overseas.

The company postponed revisiting its 2025 growth forecast to the Q2 update, citing “difficulties in measuring the impact of shifting global trade policy.”


Information for this story was found via The Wall Street Journal, Reuters, ZeroHedge, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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