Forbes Senior Editor Alan Ohnsman joins Forbes Talks to dissect Tesla's disappointing Q1 2025 earnings report. Tuesday, Tesla announced their profits plummeted 70%, missing analyst expectations in revenue and earnings per share. This is Tesla's worst performance in four years, with vehicle sales and automotive revenue declining significantly.
Alan also discuss the impact of Elon Musk's political activities on Tesla's brand and his planned return to a more active CEO role.
00:00 – Intro: Tesla’s Profits Drop 70%
00:39 – What the Earnings Report Revealed
02:26 – Tesla’s Worst Quarter in Four Years
04:11 – Musk’s Politics and Tesla’s Brand Blowback
05:47 – Elon’s Absence and Return as CEO
07:19 – Tesla’s Product Pipeline Problem
08:25 – Robo Taxi vs. Affordable Cars Debate
10:45 – $25K Tesla? Still Not Here
11:58 – Can Tesla Handle Tariffs and Rising Costs?
13:39 – The Real Brand Problem: Elon vs. Tesla
15:09 – Is Elon Aware of the Damage?
16:12 – Why Tesla Stock Jumped Despite Bad Numbers
17:10 – Tesla vs. Waymo: Risky Robo Taxi Strategy
19:24 – “We’re an AI Company Now”
20:19 – What Analysts Are Watching Next
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Alan also discuss the impact of Elon Musk's political activities on Tesla's brand and his planned return to a more active CEO role.
00:00 – Intro: Tesla’s Profits Drop 70%
00:39 – What the Earnings Report Revealed
02:26 – Tesla’s Worst Quarter in Four Years
04:11 – Musk’s Politics and Tesla’s Brand Blowback
05:47 – Elon’s Absence and Return as CEO
07:19 – Tesla’s Product Pipeline Problem
08:25 – Robo Taxi vs. Affordable Cars Debate
10:45 – $25K Tesla? Still Not Here
11:58 – Can Tesla Handle Tariffs and Rising Costs?
13:39 – The Real Brand Problem: Elon vs. Tesla
15:09 – Is Elon Aware of the Damage?
16:12 – Why Tesla Stock Jumped Despite Bad Numbers
17:10 – Tesla vs. Waymo: Risky Robo Taxi Strategy
19:24 – “We’re an AI Company Now”
20:19 – What Analysts Are Watching Next
Subscribe to FORBES: https://www.youtube.com/user/Forbes?sub_confirmation=1
Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:
https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript
Stay Connected
Forbes newsletters: https://newsletters.editorial.forbes.com
Forbes on Facebook: http://fb.com/forbes
Forbes Video on Twitter: http://www.twitter.com/forbes
Forbes Video on Instagram: http://instagram.com/forbes
More From Forbes: http://forbes.com
Forbes covers the intersection of entrepreneurship, wealth, technology, business and lifestyle with a focus on people and success.
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LifestyleTranscript
00:00Hi, everyone. I'm Maggie McGrath, senior editor at Forbes. Tesla reported its first quarter 2025
00:09earnings today, and profit was down a whopping 70%. Here to explain exactly what's going on
00:16at The Automaker is my colleague, Alan Onsman. He is a senior editor covering clean tech and
00:22automotive. Alan, thank you so much for being here. Hi, Maggie. Good to be with you. You've
00:28been covering Tesla for quite some time. Take us through this earnings report. I mentioned that
00:3370% figure, but can you take us through top line, bottom line, just the basics, what they reported
00:38today? Yeah. Honestly, the numbers were just awful. They were below analyst expectations across the
00:46board. Earnings, revenue, net income, everything came in low. They posted adjusted earnings of 27
00:56cents a share and revenue of $19.3 billion for the quarter. Analysts had expected $2 billion more,
01:05$21.3 billion in revenue for the quarter, and EPS of 41 cents. This was bad. They remained profitable,
01:15but only by a whisker. They reported $409 million of net income, which was down 71% from Q1 2024.
01:32And the only thing that kept the company out of the red was something, these regulatory credit sales
01:40that Tesla books. This is essentially free money. In California, U.S. corporate fuel efficiency standards,
01:52EU efficiency standards, in those markets, automakers have to meet certain pollution requirements. If they
02:01don't, they buy credits to stay in compliance with pollution rules. And in this case, Tesla
02:09booked $595 million in credit sales. That is free money. It's pure profit. So had it not been for all
02:18of those credit sales, they would have been in serious trouble and would have come in in the red
02:24this quarter, actually. You've been covering Tesla for a number of years. How does this quarter compare
02:30to recent quarters over the last four or five years? This is a bad one. This is their worst
02:36performance in about four years, actually, by every measure, but especially on the net income side and
02:44EPS side. So that's not good. And some analyst reports are beginning to roll in. And the sense
02:52is 2025 is going to just be a very tough year for Tesla. It was expected that Q1 numbers were going to be
03:00bad. A couple of weeks ago, the company had already released its vehicle delivery figures that was on
03:09a worldwide basis for Q1. And they reported that in terms of vehicle sales, they were down 13% year
03:16over year. But interestingly, when they when the numbers came out today, vehicle sales down 13% on a
03:25unit basis, but automotive revenue fell 20%. And what that means is not only did they sell fewer
03:32vehicles, they made less revenue for what they sold. So that means they were having to cut prices.
03:39So that hurts the margin. So Tesla really did not look great this quarter financially. It's it's kind
03:46of a shocker because people have gotten used to them really sort of leading the pack in the auto
03:51industry with much, much more robust revenue and profit growth than other automotive competitors.
03:59That was absolutely not the case this quarter. It feels like there could be a number of factors
04:04leading to these terrible numbers. What was the primary culprit? Did the company say?
04:11Well, they actually did both Elon Musk and the CFO did reference the fact that there's been a lot of
04:16brand blowback. And they tied it to Musk's activities related to Doge with the Trump administration
04:23and protests that the brand has seen, especially in Europe and the United States. And so they did
04:31acknowledge that that has been a problem. They also pointed out that they were doing some modifications
04:37to plants, especially in Texas, doing some upgrades, which slowed production in the quarter. So they
04:44weren't able to build quite as many vehicles because of these planned upgrades. But that really I'm not
04:51sure I buy that as the big reason why sales were down, because they actually ended the quarter with
04:56a fair amount of inventory, vehicle inventory, unsold vehicles, especially things like Cybertruck.
05:02So, yeah, they they did acknowledge there has been a problem with Musk's political activities.
05:10There's been blowback for Tesla. And that's really where he did clarify on the call that beginning in May,
05:19he is going to step back a bit from Doge. He he said he's not going to entirely end his activities
05:27with the Trump administration. He will keep a hand in. But he's going to be more of a regular
05:33CEO for Tesla again, because clearly, by every measure, he was an absentee CEO in Q1. He simply
05:41was spending far more time in Washington and with other companies and other activities than he was
05:46at Tesla. Did he say that? Did he admit that he did not spend enough time with Tesla?
05:51He didn't phrase it that way, but he did acknowledge he hasn't been spending as much time there.
05:55And I think he basically said on the call he was going to cut his government duties to maybe maybe
05:59one day a week rather than multiple days a week, which is consistent with something he said either
06:05earlier this month or at the end of March. And there was already kind of a term limit on him
06:11serving in the government due to transparency rules. So how much of this I'm going to come back
06:17is because of the earnings and how much was preplanned? It's probably a little bit of both.
06:22I mean, as you're as you point out, his status right now with Doge is he's a special government
06:27employee and there is like 120 day or something limit on that. So the clock is ticking. And so
06:35he really would have to stop by law under the laws it's his exists currently. So the extent of his
06:45activity will change perhaps in May. But yeah, he's telegraphed that and knew it was was happening.
06:52But I think, you know, the fact that he's coming back to Tesla full time, I don't know that that
06:57changes some of the fundamental challenges that the company is facing. Number one, and the most obvious
07:02is they do seem to have underinvested in new products pretty, pretty dramatically. The last
07:09meaningful new product they introduced was the Model Y. And that came out at the end of 2019.
07:16Cybertruck launched at the end of 2023, but that's been a niche product. It's not selling well.
07:20And so that's really not a meaningful product for the company's business. It really is
07:26these high volume affordable models like the Model 3 or the Model Y that have been their big
07:31opportunities. And they they really haven't come up with any kind of successor products that could could
07:39really build the brand, you know, beyond where it is right now. And they've just plateaued.
07:45Annual sales fell last year. The quarter was was down year over year. And analysts expect they will
07:52post an annual decline in vehicle sales this year as well. So those aren't great indicators for the
07:58core business. As usual, Elon did what he often does. He's pivoting to the future and the future at
08:06Tesla. If you believe Elon is AI, autonomous vehicles and humanoid robots. And he talked a bit about that.
08:15So he did sort of, you know, move past the lousy quarterly numbers to get to. But the future is
08:20going to be really bright. And it's pinned on on these technologies. That's an interesting pivot.
08:26There were reports earlier this month that Elon is focused on a robo taxi product at the expense of
08:34what you just described as those lower cost, higher volume cars. There had been rumors for a while.
08:40And I don't know if it came from Tesla or folks who just want this about a car that might be $30,000
08:45or under. Can you talk about the tension within the company that may or may not exist between
08:50these AI robo taxi humanoid products versus those lower cost, high volume vehicles?
08:59Yeah. I mean, literally to the beginning of the company in Elon's manifesto all the way back in 2006,
09:05he had promised that each successive Tesla model would be more affordable than the one before it.
09:11And it has just not worked out that way. The first product, the Roadster, came out in 2008. It was
09:17over $100,000. Then in 2012, they launched the Model S, which really established the brand as we know it
09:24today. But when that came to market, it was selling for close to $100,000. It was about $80,000 or so.
09:30It came down in price a bit. Then the next model was even more expensive. The Model X went way up.
09:36After that, he promised we're going to have a mass market car. That was the Model 3. It'll cost $35,000.
09:41It didn't. When it came out, it was closer to $50,000 all in. Now you can get one for much closer
09:48to $35,000, but it took a while. The Model Y was more expensive than the Model 3. It was $45,000 to $49,000
09:57base model when it came out. And the point of this is they've never had this, you know,
10:02widely affordable, cheap Tesla that he's promised. The one that had been expected for a very long time
10:10was called the Model 2. And there had been an expectation that that would be on the market by
10:16now. Last year, Elon said something that was a bit confusing where he said, yeah, we're not going to do
10:23that. We're going to do this thing instead called the Cyber Cab. And the Cyber Cab that they showed
10:28off last fall, which is their robo-taxi, appears to be the styling design that was kind of expected
10:35as the Model 2. And that is supposed to go on sale next year, but it'll only be sold as a fully
10:43autonomous robo-taxi. So it's a little confusing. So people are going to buy this and it's your personal
10:51robo-taxi or it's going to be part of a Tesla robo-taxi service. And anyway, that piece of the
10:58plan is still quite murky. But the long promised $25,000 Tesla is still not here. They did say today
11:08that they're going to be lower cost derivatives of the Model 3 and the Model Y still coming this year.
11:15There had been a report by Reuters last week that that was not happening. Reuters didn't identify
11:22who they were talking to, but their report said those are canceled. The company did say today those
11:27are still coming and we're working on them, but we didn't get any specifics. And it's difficult to
11:33understand in the current environment because of tariffs and how much more expensive some of the
11:38inputs are becoming, how they're going to be able to produce these lower priced vehicles that are,
11:46you know, five, six, seven, $8,000 less than the standard versions of Model 3 and Model Y that we
11:53have now. So we didn't get a lot of clarity on that in the call today. You led right into my next
11:59question. I was going to ask, this is for a quarter that ended before Liberation Day, before a lot of
12:07these tariffs hit. So what was the company's forward guidance and what are Wall Street analysts saying?
12:13Do they believe that the guidance is as rosy as Elon painted it?
12:17He tried, Elon kind of played it up in a, you know, we're not going to be hurt that badly kind
12:23of tone, but the CFO was a little more buttoned down and said, we just don't know. And obviously we
12:28are going to be impacted by higher prices. They pointed out they've tried to localize to the
12:34maximum extent possible production of both batteries and vehicles within the United States
12:40to try to insulate themselves from these, these impacts. But, you know, Tesla uses steel,
12:45they use aluminum, they use miscellaneous parts that are imported from Canada, Japan, South Korea,
12:51different places. So it's very complicated. And I think the analysts, again, a report I was reading
12:57just before we started talking, that particular analyst had downgraded his full year sales volume,
13:04auto volume figure for the company, simply because he was saying realistically, we've been too optimistic
13:11about Tesla's ability to bounce back from this. And so he, I think he was predicting that they'll only do
13:16about 1.72 million vehicles in 2025. That's over 100,000 units less than last year. And last year was
13:25down slightly from, from 2023. So bottom line, at least as far as vehicle sales go, there doesn't
13:34seem to be a lot of high expectation that the company is going to turn things around this year.
13:38And is that, when you say turn around from this, is that the, is the, this in reference to tariffs,
13:43or is this in reference to the brand hit that Tesla seems to be undergoing due to Musk's involvement
13:50with the Trump administration? It's both, but really more on, on, on your latter point.
13:56This brand issue is, is a problem and it is unique to Tesla. This is not an issue for Ford or Toyota
14:03or, or, or, or General Motors. This is a Tesla thing. And more specifically, it's an Elon thing.
14:10And that's what puts them in a, in a different basket. There are, you know, plenty of people that
14:16are still Elon Tesla fans, uh, and are their faith in the brand and him is not shaken, but, uh, we just
14:22keep seeing consumer survey after consumer survey that, that the brand, a lot of people are souring
14:28on, on both Tesla and, and Elon and want nothing to do with it. That's a real problem. Um, and, and I,
14:34you know, short of the company putting in a new CEO, I don't know how you really fix that. Um,
14:41you know, he and the brand are, are, are, are, you know, one in the same and, and, and it, it,
14:46it does have broad implications for, uh, sales and other things.
14:51They're intertwined in a way that not every founder CEO and his product are intertwined for
14:58better or for worse for a long time. I think it was to the company's benefit, but he, do you think
15:04he was aware of the political capital he was giving up by getting more political?
15:08I, I really can't answer that. He, he opened up the, the call today when he talked about the fact
15:15that he was going to step back, but then when he addressed the protests, um, he was completely
15:21defending everything that Doge has done. Um, he said, you know, we're rooting out fraud and waste.
15:26And he claimed that Tesla protesters are people that had been benefiting from, from government fraud
15:32and waste. So he, his view seemed to be that the protesters, these aren't real people, real customers,
15:38real buyers. These are disgruntled government employees or something. I mean, I couldn't
15:43really follow it. So, uh, I, I'm not sure he yet appreciates, um, what has happened and his
15:50responsibility in, in how the brand is suffering right now. So we've been talking about the company
15:56and I do want to move briefly to the stock. I checked in the middle of the trading day today
16:00and Tesla was actually up. I don't know if folks were anticipating a dip or I don't know what was
16:06going on, but Alan, how has the stock behaved in aftermarket trading since this report came out?
16:12Aftermarket, um, the shares were up quite a bit, uh, four or 5% at one point. Um, and it seems to be
16:18that, uh, that reaction was kind of, uh, uh, many investors feeling, um, elated or, or pleased to hear
16:26that Elon is coming back as more of a full-time CEO, uh, with the company that he won't be quite
16:32so involved with Trump administration things and Doge. Um, and, and that, that really seems to be
16:38the only justification for why the stock went up because certainly there was nothing in the numbers
16:43to give you confidence that the rest of the year is going to be better. He did pivot to, uh, talking
16:48about the new things they're going to be doing. Specifically, the thing we'll all be watching
16:52is, uh, the rollout of, um, Tesla's robo-taxi offering, which is supposed to launch in June
16:59in Austin, Texas. Um, this is going to be probably a fairly limited program. He said it'll only involve
17:06maybe 10 to 20 vehicles initially. Uh, and it's only in Austin. There's a lot we don't know about
17:12how they're doing this. Um, Waymo, uh, has become sort of the industry standard right now for robo-taxis.
17:18Uh, they're, uh, here in Los Angeles. They're in San Francisco. They're in Phoenix. They just
17:23launched in Austin. They're getting ready to go to Atlanta, Miami. They're testing in Nashville,
17:29Washington, DC. And, um, Waymo's approach is very, very thorough in terms of, uh, structured testing.
17:37They map the roads. They have vehicles loaded with LIDAR and computers and radar and cameras,
17:43and they don't let people, uh, non-company employees in the vehicles until they have a certain comfort
17:48level. And they don't begin commercial service until they really feel we've got this down.
17:54Tesla's taken a radically different approach and some would say a very dangerous and risky approach.
17:59Um, they've had autopilot and FSD full self-driving, uh, software in the cars for years. Um, they've also
18:07had a number of accidents, including some fatalities involving the use of that technology,
18:13which they've always described as sort of beta testing, except it's beta testing with real human
18:18beings in real circumstances. And there have been a number of, of, of serious accidents and,
18:23and deaths resulting from that. Um, Elon keeps promising that they're reaching the point where
18:29the FSD software is good enough that humans can be driven without having to take control of the
18:34vehicle at all times by the driver. Um, but the way that they've done this is so profoundly different
18:41than every other company that's developing autonomous vehicles has, has approached it.
18:45Um, I would say, you know, objectively, there's good reason for concern about how safe and reliable
18:52that system, uh, will be. I could be completely wrong about that. And, and maybe they'll suddenly
18:57show that they, they've mastered this, but I, I, you know, I, I, I'm Missouri show me, I, I really need
19:04to see the proof, uh, that, that this can be done reliably and safely. Uh, and I'm not convinced about
19:08that, but he talked up the fact that this will begin for the company, uh, in Austin. And he
19:14believes, uh, by the end of this year, there will be a great many Teslas all over the place across
19:20the country that are offering, uh, autonomous ride services. And his argument is we can do this
19:25more cheaply than Waymo. We have a lower cost system. They have a lower cost system because Tesla
19:30only uses cameras. That's it. Just some cameras. Um, you know, he always says humans only have two eyes
19:36in a brain and we drive just fine. You talk to a lot of computer scientists and AV researchers and
19:41they're like, yeah, uh, the car's computer is not a human brain and cameras are not eyes. So that's,
19:47you know, it's not really a, it's not the most accurate analogy there. Um, anyway, that is what
19:54he's really pushing hard. Don't mind our declining vehicle sales because we're going to be the robo taxi
20:00company and we're going to be an AI company. And by next year, we're going to have thousands of
20:05humanoid robots working in our factories. So we'll see. There is a lot to be seen, but in the
20:12meantime, Alan, what are your primary questions over the next quarter or two? What will you be
20:17looking for? Um, I, I really want to see if they get serious on the product side about addressing the
20:25weakness of the brand right now, um, and doing things other than just cheaper versions of the model,
20:31model, uh, three and, uh, the model Y. Um, there's a lot of competitive product in the EV space right
20:38now. Hyundai has great stuff. Kia has great stuff. Uh, General Motors, um, has with it's like
20:43Equinox, uh, electric Equinox SUV. That's really good. A new version of the Chevy Bolt that, uh, was a
20:50very affordable EV is coming back this year. Um, there's compelling competition at all price points
20:57for Tesla. Uh, Rivian has gotten very popular in the higher price stuff with their electric SUV and
21:03electric pickup. Um, there's just a whole range of compelling new product. The Tesla model line is a
21:09little bit stale. Uh, I I'm not sure just offering the same thing at a lower price is the most compelling
21:16strategy. So a big question is, can they really come out with something new, uh, to, to gin up some
21:23excitement? And then the second question would be, um, you know, on the, uh, RoboTaxi side, uh,
21:31can they really deliver what he's been promising? Because again, just like with affordable EVs,
21:36Elon has been promising RoboTaxi, uh, capability for a very long time. This was originally supposed to be
21:42available by like 2020 or 2021 didn't happen. We'll see what happens in Austin in June. Um,
21:50that, that, that's, that's going to be a huge question. That is certainly something to watch.
21:55Alan Ansman, thank you so, so much for joining us. We really appreciate you breaking down Tesla's
22:00Q1 earnings. We will have to have you back as each quarter unfolds. Sure. Thanks. Good to be with you,
22:05Maggie.