Tesla is in disarray. Musk has already moved beyond caring about cars.
Tesla sales are in a deep funk. Elon Musk insists he doesn't care.
The electric-car pioneer is stuck in one of its worst sales streaks, with the company reporting Wednesday that global vehicle sales fell 13.5% in the second quarter, compared with a year ago. Vehicle deliveries also dropped 13% in the first quarter.
Rivals from General Motors to China's BYD, in the meantime, have churned out high-tech vehicles, stealing market share. And Congress is preparing to pull the plug on U.S. tax credits for electric vehicles—at a time when consumers are shifting back to buying traditional cars.
'I'd encourage people to look beyond the bumps and potholes of the road immediately ahead of us," Musk told investors in April. 'Lift your gaze to the bright shining citadel on the hill."
Up on that hill is Musk's promise of self-driving taxis and humanoid robots.
Even though three-quarters of Tesla's roughly $100 billion in revenue in 2024 came from selling cars, Musk has been telling investors that he has shifted his focus to transforming the company with autonomous vehicles and robots.
Last year, Musk froze work on a new affordable model, dubbed the Model 2, which was supposed to cost $25,000. Asked by an investor when Tesla might revive that model, Musk said the company was focused on building a version of that car, called the Cybercab, without steering wheels or pedals. 'I think having a regular $25,000 model is pointless. It would be silly, like it will be completely at odds with what we believe," Musk said.
The stainless steel Cybertruck, which hasn't sold well, is the only new Tesla model in the last five years. Earlier this year, executives said they were focused on reducing prices of its current lineup. 'Monthly payment is the biggest differentiator for our vehicles," Lars Moravy, vice president of vehicle engineering, said in April.
Investors are betting on Musk's vision, propping up a stock market valuation of nearly $1 trillion based on his promises. Many Wall Street analysts say the car business is worth less than $100 a share, or a third of Tesla's roughly $300 share price. 'Most investors value Tesla's core auto business at between $50 and $100/share," Morgan Stanley analyst Adam Jonas wrote in a May research note.
Despite Musk's evangelism about the promise of Tesla's growth, the engine driving that transformation is a car business that is currently sputtering. Tesla's profit fell 71% in the first quarter, and it only managed a $409 million profit because the company sold $595 million in regulatory credits to other carmakers. When it reports second-quarter earnings on July 23, analysts expect a roughly 10% decline in sales and a profit drop of nearly 20%.
Tesla CEO Elon Musk and President Trump touted Tesla models outside the White House in March.
The problems with the car business have deepened this year, even after Musk said he was leaving the White House to spend more time on Tesla. Trade disputes have created uncertainty over the availability of rare-earth minerals from China needed to build EVs and complicated Tesla's local supply chain, which relies on parts from Canada and Mexico.
And consumer demand for EVs has eroded. Overall EV sales in the U.S. fell around 7% in the second quarter, according to Cox Automotive estimates. Ford, Hyundai and Kia on Tuesday all reported steep drops in EV sales, though GM sales jumped after it released an electric Cadillac Escalade and Chevrolet Equinox EV.
The Tesla brand has been affected in part by Musk's political activities, which have angered customers across the political spectrum. The Tesla CEO stepped aside from his role overseeing cost-cutting efforts at the Department of Government Efficiency at the end of May—around the time that Tesla board members reached out to executive search firms and some pressed the longtime leader to spend more time at the company, the Journal reported. Tesla chair Robyn Denholm later said the board had confidence in Musk and its growth plan.
The world's richest man hasn't been able to stay out of politics, after spending nearly $300 million to help get President Trump elected. He has twice feuded with Trump on social media in recent weeks, sparring over the Republican's signature 'big, beautiful bill."Musk criticized the legislation this week, saying it was fiscally irresponsible and threatening to start a new political party to challenge congressional Republicans who vote for it. Trump responded with his own threats to use the power of the federal government to punish his former adviser. On Tuesday, Trump told reporters, 'We might have to put DOGE on Elon," and, when asked, said he would consider deporting Musk, a naturalized U.S. citizen who was born in South Africa.
There also has been turmoil in Tesla's executive ranks this year. Last week, Tesla parted ways with Omead Afshar, a key lieutenant and confidant of Musk. Afshar had overseen sales and manufacturing in North America and Europe since last fall. He will be replaced in part by Tom Zhu, who had previously relocated to China to help the company catch up with the competition in Asia.
A few weeks earlier, Tesla lost the head of its Optimus robot program, Milan Kovac, who said he stepped down so he could spend more time with his family overseas.
Musk, meanwhile, has been focused on the rollout of a robotaxi service in Austin, Texas. On June 22, the day of the launch, he was pictured celebrating with the robotaxi team around a conference table covered with pizza boxes and Diet Coke. Unlike with Tesla's EV business, Musk isn't the pioneer on self-driving cars and is seeking to catch up to Alphabet's Waymo, which already has hundreds of robotaxis operating in multiple cities.
Musk has said the program could one day add $5 trillion to $10 trillion to Tesla's market cap. Last week the company showed off another new trick when the first Model Y autonomously delivered itself from Tesla's Austin factory to a customer's home about 30 minutes away.
The Tesla boss said he expects there to be hundreds of thousands of Teslas driving fully autonomously on roads in the U.S. by the end of 2026, many of which would be personally owned vehicles. In his vision, drivers will one day be able to lease their cars to other riders on the robotaxi network, much like Uber or Airbnb.
The vision was on full display in Tesla's recent impact report, in which the company demonstrated a Richard Scarry-esque town where autonomous vehicles zipped around a solar-powered city, and Optimus robots pushed children in strollers and helped people carry the groceries. One image showed a robot watering a house plant while a family plays games in the living room.
Inside the report was a new promise for how robotaxis and Optmius fit into Tesla's mission: 'We believe autonomy will save lives, time and money while improving quality of life for everyone."
A photo from the Tesla Impact Report shows an Optimus robot watering houseplants.
Write to Becky Peterson at becky.peterson@wsj.com and Sean McLain at sean.mclain@wsj.com
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