Tesla Faces Revenue Slump Amid EV Credit Cuts, Musk Bets on Robotaxi Future

Tesla CEO Elon Musk warned of potential “rough quarters” ahead as U.S. government cuts to electric vehicle tax credits take effect, impacting demand. The company’s April-June revenue fell 12% year-over-year to $22.5 billion, missing analyst expectations, while adjusted earnings per share dropped to 40 cents. Shares slid nearly 5% following the earnings call.

The decline marks Tesla’s second consecutive quarterly revenue drop and its steepest sales fall in over a decade. Automotive gross margins, excluding regulatory credits, reached 14.96%, slightly above forecasts due to lower production costs. However, sales of regulatory credits — a key profit driver — plunged 51%, further pressuring earnings.

Musk emphasized Tesla’s focus on self-driving technology, predicting revenue growth from autonomous ride-hailing and Full Self-Driving (FSD) services by late 2026. Tesla recently began limited robotaxi trials in Austin, Texas, and aims to expand service to half of the U.S. population by year-end, pending regulatory approval. Plans for volume production of its Cybercab robotaxi and Semi Truck remain set for 2026.

The company is also developing a cheaper version of its best-selling Model Y SUV, though production ramp-up will be slower than expected. Rising competition from low-cost Chinese EV makers and waning tax incentives pose additional challenges as Tesla’s lineup ages.

Despite headwinds, Musk expressed optimism about long-term prospects, citing autonomy as the company’s core growth driver. “Once you get to autonomy at scale in the second half of next year… Tesla’s economics are going to be very compelling,” he said.