Cheaper Model Y Can't Come Soon Enough As Tesla's Profits Tank Again
In Q2 of 2025, Tesla's revenue dropped 12% and profits were down by 16% year-on-year, due to a sharp decline in sales, reports The Globe And Mail. Revenue was down from $25.5 billion to $22.5 billion, while quarterly profits dropped from $1.4 billion to $1.17 billion. In premarket trading on Thursday, Tesla's shares dropped by close to 7%, and its stock is down by around 18% so far in 2025, according to Reuters.
Elon Musk's political controversies are widely believed to have damaged Tesla's image. This, together with stronger and stronger competition, has resulted in the decline we're witnessing in 2025. Furthermore, the groundbreaking Cybertruck was expected to take over the electric pickup segment, but that hasn't happened.
"Musk is the face of Tesla, and for many people, the brand can't exist outside of his influence. So, when his credibility and trust decline, so does the equity of the Tesla brand", said Daniel Binns, Global CEO at Elmwood.
Related: Tesla Won't Like How Many Pre-orders New $46k Chinese SUV Received
In the earnings call, Musk admitted that the company expects a "few rough quarters" in the near future. Contributing to this is the fact that federal tax incentives for EVs are falling away at the end of September, which will significantly affect the value proposition of Tesla's two high-volume cars, the Model Y and Model 3.
Many expected a cheaper car to boost Tesla's fortunes, but this vehicle won't be an all-new car. "It's just a Model Y," said Musk when talking about the lower-cost EV, reports Inside EVs. "Let the cat out of the bag there," he said.
"We continue to expand our vehicle offering, including first builds of a more affordable model in June, with volume production planned for the second half of 2025," said Tesla.
Related: New Report Highlights 'Hidden Truth' Behind Tesla's Vanished $25K EV
We don't expect anything close to the once-promised $25,000 EV. Now that we know a cheaper Model Y is coming, a less powerful version that starts at below $40k looks likelier.
"We're in this weird transition period where we'll lose a lot of incentives in the U.S.," Musk said. "Once you get to autonomy at scale in the second half of next year, certainly by the end of next year, I would be surprised if Tesla's economics are not very compelling."
Musk is known for his hyperbolic promises, so we would take that statement with a pinch of salt. It's clear that Tesla has an image problem, and changing that with Musk still at the helm is going to be an uphill battle.
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