A 2023 Model X sport utility vehicle outside a Tesla dealership on Sunday, June 18, 2023, in Littleton, Colorado.

David Zarbowski/Associated Press

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David Zarbowski/Associated Press

Tesla’s profits fell 46% from a year ago, the company said in its earnings report Wednesday evening.

That wasn’t surprising at all. In fact, it was a surprise. better That was bigger than most analysts expected. Tesla had already reported sales for the quarter, which showed the recession continued for the entire period. many of year. Even more revenue from other parts of the company, such as growth in its energy storage business, doesn’t make up for the fact that Tesla isn’t selling as many cars as it used to.

Tesla was once the undisputed global leader in electric vehicle sales, but it has lost that crown as the brand’s reputation deteriorates and competition intensifies, especially from China.

But the company continues to maintain that it is in the process of transitioning from a car company to a “physical AI company” with value based on self-driving car technology, robotaxi services and, ultimately, humanoid robots.

As part of its policy change, Tesla will discontinue production of its high-end Model S and Model X vehicles. These vehicles were already produced in far lower numbers than the more affordable Model 3 and Model Y, but they had symbolic value. of model S,especially, big step forward For Tesla and electric cars. tesla called it It was the “world’s first mass-produced, highway-capable EV” and the first vehicle built at Tesla’s Fremont factory.

Instead of traditional vehicles, the company is eyeing CyberCab, a vehicle without a steering wheel or pedals that is intended to replace the company’s existing Teslas. New birth robotaxi work.

“Over time, we expect to build far more CyberCabs than all of our other vehicles combined.”,” Musk spoke Wednesday night during a quarterly earnings call with investors and analysts. “In the future, the majority of miles driven will be autonomous…I’m just speculating, but someone will actually drive a car for probably less than 5% of miles driven.”

And when it comes to robots, Tesla is taking over the Model S and Model X production lines at its Fremont factory and dedicating that space to robot production. Humanoid robot “Optimus”Musk said production would begin this year. (For musk historyhe often jokingly refers to over-promising with timelines. )

Mr. Musk warned Wall Street that as part of these plans, the company would spend significant amounts of cash over the next year. That amount is an eye-popping $20 billion, more than double the amount the company spent on capital expenditures in 2025.

“We are investing heavily in a grand future,” Musk said.

Tesla has lost its position as the world’s top EV seller

The world’s top EV maker is now a Chinese company, not Tesla.

In 2025, Chinese automaker BYD sold more than 2.25 million battery-powered vehicles. According to the company.

Tesla sold 1.65 million vehicles, lower than its 2024 sales volume. This was the second consecutive year of decline in unit sales.

In late 2023, Musk warned investors that Tesla was in a “growth wave” and set expectations low for 2024, but expectations were high. Return to rapid expansion With the launch of the “next generation” vehicle tentatively planned for 2025.

The second wave of growth has not yet materialized. Tesla has repeatedly teased a much cheaper Tesla, rumored to sell for around $25,000, thanks to revolutionary changes in manufacturing. Even after Reuters reported that the car was deadmusk publicly maintained It was coming.

But that wasn’t the case. musk finally confirmed The company announced that it will focus a major redesign effort on the CyberCab. Instead of offering significantly cheaper vehicles, the company rolled out slightly cheaper versions of the Model 3 and Model Y.

Meanwhile, the U.S. electric vehicle market suffered a big blow. the sale has already taken place Performance below expectationsThen President Trump took office, and his administration Roll back systematically EV incentives rules. EV sales increase significantly In the summer of 2025, consumers will Consumption tax credit disappearedand was lowered when the tax credit expired at the end of September. Automakers say it’s not yet clear what demand for EVs would be without these tax credits.

President Trump’s policy changes have had a more direct impact on Tesla, depriving it of a major source of revenue. Under previous government policy, automakers that failed to meet requirements to make their vehicles cleaner could buy “credits” from competitors that overperformed in EV production, instead of paying fines. This used to be a lucrative source of financing for Tesla, but it is now dwindling. Tesla generally does not respond to requests for comment and did not respond to inquiries about the matter.

On the other hand, EVs continue to dominate globally. decemberin the European Union, buyers registered more new pure EVs than conventional gasoline cars for the first time in history. Hybrids (like the first-generation Prius) are still more popular than either, but their market isn’t growing as quickly as EVs. In Europe, sales of electric vehicles increased by more than 50% year-on-year, but sales of popular hybrid vehicles increased by only 6%. Sales of conventional gasoline and diesel cars fell by about 20%.

In China, most new vehicles Already electric or plug-in hybrid. And China’s EV exports are on the rise, becoming popular in places such as: Mexico and Brazil. Canada too just signed a contract Allow the import of some Chinese-made EVs without high tariffs.

In addition to BYD’s notable success, major Chinese automaker Geely Automobile has increased sales of battery-powered vehicles by 90%. YoY comparisonwhile its competitor SAIC has grown. 33% increase in sales.

These numbers include sales of plug-in hybrid vehicles, so they aren’t all that different compared to Tesla’s pure electric vehicle sales, but the trajectory is clear when compared to Tesla’s declining sales. Tesla used to lead the EV race, but now Chinese manufacturers are holding the momentum.

Brands take a hit

Meanwhile, Tesla is grappling with an increasingly skeptical or even hostile consumer base in the United States.

Mr. Musk is controversial political activity lastly several years have alienated many center-left American. He has won some fans on the right, but remains popular with Republicans and conservatives for now. They are less likely to buy an EV.

Evan Ross Smith is a pollster who continues to study consumer sentiment regarding Tesla and EVs. Electric Vehicle Intelligence Report. According to him, latest research Nearly every car brand has an overall positive reputation among more than 3,000 U.S. consumers. Toyota ranks at the top: Almost half of Americans have a positive view of the Japanese brand, while just 7% have a negative view. In contrast, the company has more haters than fans, with 27% having a positive view and 37% having a negative view.

Tesla’s unpopularity with the general public is highly unusual for an automaker, he says: “Most automakers don’t have any kind of political values ​​or public controversy.”. ”

And brand awareness influences sales.

Even current Tesla owners, who have been remarkably loyal to the Tesla brand for years, are showing some interest in shopping. LexisNexis Risk Solutions track The brand that current car owners will buy for their next car. If they continue to use the same brand, it is evidence of brand loyalty. According to their data, Tesla, which had ranked first or second in industry loyalty in recent years, fell to third place in 2025.

The company still enjoys higher royalties than the industry average. But it’s clear that EV buyers now have more options, and even Tesla enthusiasts are more willing to consider them. In 2020, LexisNexis found that an astonishing 98% of existing Tesla owners who bought another EV went on to buy another Tesla. In 2025, that number will drop to 78%.

Musk focuses on AI and robots, not cars

Masks — Recently, special salary package Tesla, which could be worth up to $1 trillion, is contingent on achieving lofty growth and valuation goals, and has long maintained that its future lies in self-driving cars, artificial intelligence and humanoid robots.

However, he has frequently missed his own timeline for achieving these accomplishments. The driver-assistance software in Tesla cars still requires human supervision, and the robotaxi service is only available in small pilot programs in Texas and California, despite Mr. Musk’s promise to bring the service to 50% of the United States by the end of 2025.

A Ross Smith poll found that Tesla’s continued focus on autonomy and robotaxis isn’t helping it win over public opinion. “Full self-driving (with supervision)” software that allows Tesla cars to self-pilot without human supervision is central to Mr. Musk’s vision for the company. According to Ross Smith’s research, only 14% of respondents said FSD made them more likely to buy a Tesla. 34% said it helped them succeed few probably.

And of the more than 20 car brands that Ross Smith surveyed with consumers, the only ones other than Tesla that were viewed negatively by the public online were Cruise, Waymo, and Zoox, all self-driving car companies.

“There’s a lot of skepticism from consumers about whether this technology is safe for large-scale deployment and whether regulators have a responsibility to set the rules of the road for self-driving cars,” Ross-Smith said.

Ross Smith argues that Musk has linked Tesla to these controversial robotaxis by focusing on autonomy. “They’re now being perceived as a more controversial, more polarizing type of technology,” he says.