Key Takeaways:

  • Tesla CEO Elon Musk said on the company's earnings call Wednesday that tax and spending provisions in the Big Beautiful Bill affecting the electric vehicle market have put the company in a "strange transition period," and it will lose some incentives in the U.S. market.
  • "I mean, does that mean we might go through a few tough quarters? Yes, we very well might have a few tough quarters," Musk said in response to a question about the impact of these policy changes.
  • The Austin, Texas-based company faces several "near-term challenges," including the negative impact of the Trump administration's spending plan and tariff issues, Chief Financial Officer Vaibhav Taneja said Wednesday according to a transcript. In the second quarter of 2025, the electric vehicle maker's revenue and profit declined for the second consecutive quarter.

Deep Dive:

Among other regulatory changes that could affect the business, the tax bill will end the $7,500 EV tax credit in September and reduce fines for certain emissions standards to zero — which Taneja said on the call would impact regulatory credit sales, leading to lower revenue. Due to this "sudden change," the company has limited vehicle supply in the U.S. this quarter, he said.

"If you are in the U.S. and planning to buy a car, please place your order now, because we may not be able to guarantee delivery of orders placed in late August and beyond," Taneja said. The CFO also warned that tariffs will continue to have a negative impact, noting that on a sequential basis, tariff costs "increased by approximately $300 million, with about two-thirds of the impact in the automotive business and the remainder in the energy business." However, "given the lag in manufacturing and sales, the full impact will be felt over the coming quarters, so near-term costs will rise."

In the second quarter ended June 30, the electric vehicle maker's revenue and profit both declined. According to its earnings presentation, total revenue fell 12% year-over-year to $22.5 billion. Meanwhile, operating income fell 42% year-over-year to $900 million, while net income attributable to shareholders fell 16% to approximately $1.1 billion. Tesla attributed the decline partly to lower vehicle deliveries and sales, after the company reported a 14% drop in deliveries on July 2.

Despite weak sales, Musk said he remains optimistic about the company's future and pushed several new initiatives on Wednesday's call, including a "robotaxi" pilot program in Austin, where the company is testing autonomous vehicles.

The quarterly results come as Tesla continues to face increased scrutiny from consumers, investors, and regulators. The electric vehicle maker is facing two lawsuits over its autonomous driving technology, including a jury trial over a 2019 crash currently underway in Florida. Tesla is also in conflict with the California Department of Motor Vehicles over its alleged "exaggerated claims about its autonomous driving capabilities," Bloomberg reported.

Tesla also continues to face backlash against CEO Musk's political activities. According to The New York Times, the company's stock fell in July after Musk announced he would form an independent political party.

The company's executive ranks have also come under further scrutiny after two separate filings with the Federal Election Commission listed Taneja as treasurer of the "American Party (AEMP)" and the "American Party (TAP)," CFO Dive previously reported. The FEC has sent letters to the parties noting that certain details may be incorrect — both filings provided incorrect California addresses and listed phone numbers leading to Tesla's investor relations department — and requested further information by August 11.

As the company's sales continue to weaken, Tesla shareholders have also increased pressure on Musk. CFO Dive previously reported that before the company set its annual meeting date, 27 shareholders sent letters to company leadership outlining growing concerns about corporate governance.

As Tesla continues to increase investment in new technologies such as AI, robotaxis, and robots, one analyst asked Musk on Wednesday whether, given his current control of the company, he feels "comfortable" investing in these areas. Musk holds approximately 410 million shares of Tesla common stock, representing about 13%.

"This is a major concern, and as I have mentioned in the past, I hope it will be resolved at the upcoming shareholder meeting," Musk responded.

"I think I've also said before that I believe my control over Tesla should be enough to ensure it moves in the right direction, but not so much that I couldn't be removed if I went crazy," he said.