Tesla Inc on Tuesday reported a steep decline in revenue and profit for the first quarter of 2025, with results falling to levels last seen in 2022, as the U.S. electric vehicle maker cited a broad range of challenges including a production transition, macroeconomic uncertainty, and weaker demand for its core models.
Revenue for the January-March period dropped 9% year-on-year to $19.3 billion, while net profit slumped 71% to $409 million, reflecting reduced vehicle deliveries and the ramp-up of an updated Model Y, which caused downtime across all manufacturing sites. Compared to the previous quarter, revenue was down 25% and profit dropped 81%. Operating margin also declined sharply to 2.1%, down from 11% in Q4 2024 and far below its 2022 peak of 19%.
See also: Tesla Prepares for India Launch as Model Y Spotted Testing Near Mumbai
Tesla delivered 336,681 vehicles in the quarter, a 13% year-on-year drop and 27% lower than the previous quarter. Production was down 16.3% from a year earlier, totaling 362,615 units. The last time output was this low was in the second quarter of 2022. Deliveries were dominated by the Model 3 and Model Y, which together accounted for over 96% of total handovers. Higher-end models including the Model S, Model X, and Cybertruck contributed just 12,881 deliveries.
The company said the decline stemmed primarily from the global production transition to the facelifted Model Y – known as Juniper – which caused several weeks of downtime. “We achieved record orders for a single day in the APAC region when we launched New Model Y,” Tesla said, noting that the Shanghai factory ramped up Juniper production in six weeks, its fastest pace to date. However, CEO Elon Musk also acknowledged that “uncertain times,” higher operating costs, rising R&D spending on artificial intelligence, and a lower average vehicle sales price weighed heavily on financial results.
See also: Tesla Postpones Rollout of Cheaper Model Y Variant
Excluding regulatory credits and the energy business, automotive revenue alone stood at $14 billion, down 20% year-on-year and 29% quarter-on-quarter. Regulatory credits alone contributed $2.6 billion, propping up Tesla’s profitability in what would otherwise have been a break-even quarter. The firm has continued to prioritize volume over margins, employing aggressive price cuts that have further eroded profitability.
Competition has intensified, particularly from Chinese rival BYD, which surpassed Tesla in global BEV sales during the quarter with 416,388 units. Including plug-in hybrids, BYD’s total sales approached one million vehicles in Q1. Tesla’s position was also impacted by delays in launching more affordable models, which are now expected to begin production later in 2025, despite earlier indications of a first-half rollout.
See also: Trump Tariffs Disrupt Tesla’s Cybercab and Semi Supply Chain Plans
Looking ahead, Tesla reiterated its goal to eventually utilize its nearly three-million-unit annual production capacity, aiming for 60% growth over 2024’s output of 1.77 million units. The company declined to issue a full-year guidance but said it would provide an update in its Q2 report. Tesla also confirmed plans to start production of the electric Semi in Nevada and the autonomous Cybercab in Texas in 2026. A pilot of the Cybercab is scheduled to begin in Austin this June.
In its quarterly filing, Tesla highlighted its ongoing investments in AI, robotics, and software, including the rollout of Full Self Driving (FSD) features in China and upcoming expansions in Europe. The company said these segments are expected to drive future profitability, though they will require sustained long-term investment. “AI is a major pillar of growth for Tesla and the broader economy,” the company noted.
See also: Tesla Hits 400,000-Vehicle Milestone at Giga Texas as Model Y Production Ramps Up
Despite near-term challenges, Tesla signaled that its longer-term roadmap remains intact, with future quarters expected to reveal whether demand for the updated Model Y and forthcoming lower-cost models can restore momentum.
TSLA-Q1-2025-Update (1)