Investors reacted positively to Elon Musk's announcement that he would devote more time to Tesla and less to his political role at the Department of Government Efficiency, pushing the company's stock upward despite underwhelming first-quarter results.
“Starting early next month, in May, my time allocation to DOGE [Department of Government Efficiency] will drop significantly,” Musk told investors on the company’s earnings call.
The billionaire entrepreneur added that while he would continue dedicating one or two days weekly to DOGE, he would be “allocating far more of my time” to Tesla.
Analysts See Positive Shift Despite Partial Commitment
Barclays analyst Dan Levy noted in a client communication: “While we would have preferred a full re-engagement with Tesla (as opposed to still sharing time with political efforts), we nevertheless believe the narrative should benefit from a re-engaged Elon on Tesla – simply, with Tesla more heavily focused on AV/AI, Elon is more important than ever to keep this narrative moving forward… Elon is Tesla.”
The company reported first quarter revenue of $19.34 billion, significantly below the $21.43 billion Wall Street forecast and the $21.3 billion reported a year ago. Adjusted earnings per share came in at $0.27, missing the $0.44 analyst consensus, with adjusted profits dropping 40% year-over-year.
Trade Uncertainty and Tariff Concerns
The electric vehicle maker pointed to global trade uncertainty as a key factor behind declining sales performance.
“Uncertainty in the automotive and energy markets continues to increase as rapidly evolving trade policy adversely impacts the global supply chain and cost structure of Tesla and our peers,” the company stated. “This dynamic, along with changing political sentiment, could have a meaningful impact on demand for our products in the near-term.”
During the earnings call, Musk mentioned telling President Trump that “lower tariffs” would better serve the country, while acknowledging that tariff decisions ultimately rest with the president.
Given the uncertain trade environment, Tesla announced it would revisit its 2025 guidance in the second quarter financial update and has removed its long-term growth forecast.
Margin Performance and Future Product Plans
Tesla reported a first-quarter gross margin of 16.3%, slightly outperforming the expected 16.1%, with automotive gross margin excluding regulatory credits at 12.5%.
The company maintained that plans for new affordable vehicles remain on track for production starting in the first half of 2025, with Robotaxi volume production still planned for 2026.
Tesla executives addressed concerns about affordable EV delays by emphasizing the company’s focus on affordability, noting that these efforts would resemble existing Tesla models. Musk added that the company is targeting Robotaxi testing in Austin by June and claimed Tesla’s vehicles were considerably less expensive than competitors like Waymo, which he said incorporated costly sensor systems.
Demand Challenges and Brand Perception
Tesla’s first quarter saw deliveries drop to 336,681 units, marking the worst quarterly delivery performance since Q2 2022. Meanwhile, competitors reported substantial sales increases as consumers accelerated purchases to avoid tariffs that took effect April 2.
The company faces additional headwinds from declining European registrations and potential brand damage stemming from Musk’s political activities. The CEO’s close relationship with President Trump and support of right-wing European politicians has reportedly impacted Tesla’s brand perception, with protests at showrooms increasing both domestically and internationally.
Bank of America analyst John Murphy highlighted several trade-related challenges for Tesla, including disproportionate tariff effects on its energy business due to Chinese-sourced LFP batteries, volume guidance uncertainty, potential impacts from China’s restrictions on rare earth minerals used in electric motors, and the company’s reliance on Chinese manufacturing equipment.