Tesla reports sharp profit decline, withdraws annual sales forecast amid tariff, supply chain pressures

Tesla's steep profit decline and withdrawal of its 2025 sales forecast mark a major turning point for the EV giant, underscoring mounting pressures from tariffs, supply chain constraints, and leadership controversies as it navigates slowing growth and intensifying global trade tensions.

Tesla's first-quarter 2025 earnings report revealed a significant downturn, with vehicle deliveries falling to approximately 336,700 units—a 13% year-over-year decline and the lowest in eleven quarters. This level of performance marks a return to pandemic-era sales volumes. As a result, Tesla's revenue and net profit dropped by 9% and 71%, respectively, compared to the same period last year.

Net profit plummeted to around US$410 million, an 81% decline from the previous quarter. Operating income also declined 66% year over year, representing the company's first major setback since entering its high-growth phase.

In response to the disappointing results, Tesla has withdrawn its earlier sales growth forecast for 2025. The company said it would reassess its outlook in the second quarter, citing the impact of tariffs, an aging product lineup, and public criticism of CEO Elon Musk as contributing factors.

During the April 22 earnings call, Musk said tariffs are entirely up to the US president, adding that he had advised the administration and opposed the tariffs, but the final decision rests with President Donald Trump, CNBC reported.

To mitigate tariff-related pressures, Musk emphasized Tesla's efforts to localize supply chains in the US. He said the company is working to reduce cost risks and logistical challenges by sourcing more components domestically. Compared to its competitors, Musk claimed Tesla is relatively less exposed to tariff risks due to its vertically integrated operations and manufacturing presence in North America, Europe, and China.

Still, Musk acknowledged challenges in the company's energy business, which has been hit by tariffs on lithium iron phosphate (LFP) batteries sourced from China. Tesla is now tuning its equipment to produce LFP batteries domestically, though its current capacity remains limited. He added that diversifying the supply chain away from China will take time.

Musk also addressed recent criticism over his political engagements, as reported by Bloomberg. He announced plans to significantly reduce his time spent on duties at the US Department of Government Efficiency (DOGE), stating that beginning in May, he will dedicate more time to managing Tesla. Musk said he would continue limited involvement with the Trump administration but expects to focus more closely on company operations moving forward.

Tesla also omitted its prior projection of a full-year sales recovery, instead stating it will make strategic investments to prepare for growth in its automotive business, contingent on production scale-up and broader macroeconomic conditions.

Tesla stated in its earnings report that measuring the impact of global trade policy changes on its supply chains, costs, and demand for durable goods is challenging.

Article edited by Jerry Chen