Tesla's shares rose close to eight percent on Wednesday, April 23, after the announcement by CEO Elon Musk that he would tone down his engagement with the Trump administration in order to be more hands-on with running his companies.
Despite the fact that Tesla recorded a hefty 71 percent decline in net profit in the first quarter, its auto business core earnings were above Wall Street expectations.
Musk pledged to reduce "substantially" from his involvement with the US government to focus on Tesla, soothing investors' fears after the worst quarter in years for the company. After the announcement, Tesla's stock increased more than three percent when trading resumed. The stock, however, has fallen 10 percent in the last month and has fallen 35 percent year-to-date (YTD).
Musk stated that he intends to spend "far more" time at Tesla from next month on, since he figures that his effort in setting up the so-called Department of Government Efficiency (DOGE) will be largely done. He added that he would probably carry on with his effort in serving the Trump administration through the President's remaining term but on a lesser scale. Musk will reach the 130-day threshold for his status as a special government employee next month.
Tesla's First-Quarter Results
In spite of a weak first-quarter performance, Tesla's stock began to recover. The maker of electric vehicles struggled in its core auto business and in its energy operations, which were affected by tariffs. Both earnings and revenue fell short of analyst estimates, and management cooled earlier forecasts that vehicle sales would recover this year.
Tesla posted a net income of $409 million in the January-March quarter, below analysts' expectations. Its quarterly revenue fell nine percent from the same period last year to $19.34 billion, short of the consensus estimate of $21.11 billion. Operating income for the quarter was $399 million.
Moreover, Tesla withdrew its earlier 2025 guidance due to uncertainties in trade policies and demand patterns. Wall Street has increasingly criticized Musk's political endeavors, which have driven away some of the company's core customers and sullied Tesla's brand reputation. Musk also saw his wealth plummet by a record $116 billion in Q1, his biggest quarterly loss ever, as per Bloomberg's Billionaires Index.
Tesla will reevaluate its production expectations when it reports Q2. The company has also cut its capital spending plans for this year, cautioning that shifting trade policies may push back on some projects.
Trump Tariffs' Impact on Tesla
US President Donald Trump's move to increase tariffs on foreign imports has sent shivers down the spines of investors, raising apprehensions of increasing prices for American consumers. Though all Tesla models sold in the US are made locally, increased tariffs on car parts from Mexico and Canada that are scheduled to be implemented next month may weigh on Tesla's profitability.
Musk reassured analysts that Tesla has been making efforts to localize its supply chains, which should help alleviate logistical difficulties and lower the effect of increasing costs. "We are, I think, the least impacted car company with regard to tariffs," Musk said. "That puts us in a better position than any one of our competitors."
In its quarterly report, Tesla indicated that "shifting political opinion could have a material effect on demand for our vehicles in the near term." Musk also stated that demonstrations against the firm were "organized and paid for," but he did not offer additional facts or evidence.
Musk is putting the future of Tesla on building autonomy and artificial intelligence. The automaker is developing a driverless cab business called Cybercab, and a humanoid robot called Optimus. Tesla has also readied its factories for launching new products, and in addition, moved production lines to revamp the Model Y.
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