Tesla's Profits Decline Due to Drop in Electric Vehicle Sales

Tesla reported a significant decrease in adjusted earnings for the second quarter, following a record drop in sales during the same period. The company's adjusted net income fell by 23% to $1.4 billion, surpassing the 13.5% decline in sales. Net income also dropped by 16% to $1.2 billion.

Tesla's core business, auto revenue, fell by 16% in the second quarter, leading to an overall revenue decrease of 12%. The company earned $500 less per vehicle sold, with revenue per vehicle dropping to $42,231. Sales of the Model Y and Model 3 decreased by 12%, while sales of higher-priced models like the Cybertruck plummeted by 52%.

Following the report, Tesla's shares dropped by 2% in after-hours trading. The decline in sales has been attributed to backlash from CEO Elon Musk's political activities and increased competition in the electric vehicle market, particularly from Chinese automakers.

Tesla's sales have been declining even in markets where electric vehicle sales are rising. The company is at risk of losing its position as the world's largest EV maker to BYD, a Chinese car company. Tesla has faced challenges over the past 18 months, with the expiration of a $7,500 tax credit for US EV buyers in October expected to impact sales significantly.

One of Tesla's major financial concerns is the elimination of the market for regulatory credit sales, which has contributed $11 billion to the company's bottom line since 2019. Musk did not directly address the sales and revenue decline during the investor call but mentioned the financial obstacles ahead.

Musk expressed optimism about the company's future, focusing on ambitious goals for Tesla's robotaxi service and the development of the humanoid robot, Optimus. He predicted challenging times for Tesla in the near future but anticipated improved economics by the middle of next year. Musk emphasized the importance of autonomy for Tesla's future success.