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Tesla CEO Elon Musk has announced plans to scale back his involvement in Donald Trump's administration following a steep decline in the company's earnings and revenue in early 2025.
Tesla reported a 20% year-on-year drop in automotive revenue for the first quarter, and profits tumbled over 70%. The company cited “changing political sentiment” as a potential threat to demand and refrained from offering a growth forecast.
The downturn comes amid growing criticism of Musk’s high-profile political role. His involvement in Trump's administration — including a $250 million contribution to the president's re-election campaign and leadership of the Department of Government Efficiency (Doge) — has triggered protests and global calls to boycott Tesla.
Musk admitted that his government work had diverted attention from Tesla and confirmed he would significantly reduce his commitment to Doge, limiting his time to just one or two days a week. He maintained that while his work with Doge is “mostly done,” he would continue serving as long as it remains useful and welcomed by the president.
Musk attributed the public backlash to critics targeting both him and the Doge team, but defended the initiative as vital.
Tesla's total revenue for the quarter stood at $19.3 billion, falling short of the $21.1 billion expected by analysts. The decline followed a series of price cuts aimed at boosting sales. The company also pointed to Trump’s tariffs on Chinese imports as a key factor driving up costs and threatening its supply chain, despite Musk’s claim that Tesla’s global manufacturing footprint offers some protection.
Musk, who has had public clashes with members of the Trump administration, notably trade adviser Peter Navarro, expressed continued opposition to high tariffs, labeling them as harmful to low-margin industries like automotive manufacturing.
Investor confidence has been shaken. Tesla’s share price has plunged 37% since the start of the year, although it saw a slight rebound in after-hours trading following the earnings announcement. Analysts say the company faces intensifying competition and global trade risks.
Dan Coatsworth of AJ Bell remarked that investor expectations were already low, especially after Tesla revealed earlier this month that vehicle deliveries had dropped 13% — hitting a three-year low. He warned that Tesla’s challenges are growing, with supply chain vulnerabilities adding to the pressure.
Despite these hurdles, Tesla said it still sees artificial intelligence as a driver of future growth, though investors remain skeptical.
