Tesla has reported its most significant revenue decline since 2014, marking its third consecutive quarter of falling profits. The electric vehicle giant is now pivoting its growth strategy towards its robotaxi and artificial intelligence (AI) businesses, moving beyond its traditional car sales model.
In the second quarter of 2025, Tesla announced a profit of $1.2 billion USD, a decrease from $1.4 billion USD in the same period of 2024. The company also revealed a 12 percent drop in revenue, down to $22.5 billion USD from $25.5 billion USD in 2024. This decline follows a 66 percent year-on-year fall in operating income during the first quarter of 2025.
Meanwhile, Tesla’s market position in Europe has been challenged, with Volkswagen’s electric vehicle sales surging by 78 percent, pushing Tesla to second place. In Australia, despite a recovery from a 2024 slump, Tesla’s sales for the first half of 2025 were 14,146, down from 23,116 in the same period of the previous year.
Challenges in the US Market
The announcement comes as Tesla and other US automakers face mounting pressures. General Motors reported a $1.1 billion loss in the second quarter, while Stellantis recorded a €2.3 billion loss between January and June. Ford is expected to release its second-quarter earnings shortly, adding to the industry’s tense climate.
Tesla CEO Elon Musk has warned of “a rough couple of quarters” ahead, particularly as the US government, under President Donald Trump, has ended electric vehicle sales incentives. These incentives, which offered up to $7,500 USD to EV buyers, will cease in September 2025. Additionally, the removal of fines for exceeding emissions laws cuts off a significant revenue stream for Tesla, which previously sold regulatory credits to other manufacturers.
“Regulatory credits made up 38.6 percent of Tesla’s net income in 2024,” noted Tesla CFO Vaibhav Taneja, adding, “We are in an unpredictable environment.”
Strategic Shift to AI and Robotaxi
Despite the financial setbacks, Tesla is optimistic about its future. The company is betting heavily on its robotaxi service and AI advancements to drive growth. The robotaxi service, featuring the autonomous Cybercab, has launched a pilot program in Phoenix, Arizona, with plans to expand to other cities like San Francisco.
Furthermore, Tesla is integrating AI into its vehicles, with the Grok AI assistant now part of the software in new Teslas sold in the US. Elon Musk believes these innovations will position Tesla as the world’s most valuable company.
“I do think if Tesla continues to execute well with big autonomy and humanoid robot autonomy, it will be the most valuable company in the world,” Musk stated during the earnings call.
Looking Ahead
In addition to its AI and robotaxi ventures, Tesla is also working on a more affordable model, which entered early production in June 2025. This model, described by Musk as “just a Model Y,” could potentially be priced under $50,000 AUD in Australia, though details of its local launch remain unconfirmed.
The move represents a strategic shift as Tesla navigates a challenging market landscape. With the removal of incentives and changes in emissions laws, the company is focusing on innovation and diversification to maintain its competitive edge.
As Tesla continues to adapt, the coming quarters will be critical in determining whether its ambitious plans can translate into sustained growth and profitability.
