Musk says he'll dedicate more time to Tesla from May after big drop in quarterly profit

Tesla says profits fell by 71% to $409 million

Tesla chief executive Elon Musk tops up with a 'Trump Was Right About Everything' hat at a cabinet meeting in the White House on March 24. Reuters

Elon Musk says he will dedicate more time to Tesla starting in May after the company reported a big drop in first-quarter profit.

The company has faced angry protests over Mr Musk’s leadership of a federal government jobs-cutting group that has divided the country.

Tesla, based in Austin, Texas, said on Tuesday that quarterly profits fell by 71 per cent to to $409 million, or 12 cents a share. That is far below analyst estimates. Revenue fell 9 per cent to $19.3 billion in the January to March period, also below Wall Street’s forecast.

The disappointing results come as the company struggles to sell cars to consumers opposed to Mr Musk’s role in President Donald Trump's administration. Mr Musk also has publicly supported far-right politicians in Europe and alienated potential buyers there, too.

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Some Tesla investors have complained that Mr Musk has been too distracted by his role at the Department of Government Efficiency, or Doge, to effectively run Tesla.

“This is a big step in the right direction,” said Wedbush Securities' Dan Ives, referring to Mr Musk's decision to shift focus from Washington. “Investors wanted to see him recommit to Tesla.”

Tesla’s stock has fallen more than 40 per cent this year but rose nearly 5 per cent in after-hours trading.

Morningstar analyst Seth Goldstein said earlier reports of plunging sales that had tanked the stock made the results almost predictable.

“They’re not particularly surprising given that deliveries were down,” Mr Goldstein said, adding that the company is still generating cash. “It was good to see positive cash flow.”

The company generated $2.2 billion in operating cash compared with $242 million a year earlier.

The company said it expects to roll out a cheaper version of its best-selling vehicle, the Model Y SUV, in the first half of this year. Tesla has also said it plans to start a paid driverless robotaxi service in Austin in June and other cities soon after, with much of its fleet operating by itself next year.

“There will be millions of Teslas operating autonomously in the second half of the year,” said Mr Musk in a conference call after the results were announced. "Can you go to sleep in our cars and wake up at your destination? I’m confident that will be available in many cities in the US by the end of this year.”

A Tesla Model 3 drives itself in Encinitas, California, in October 2023. Reuters

Tesla's closely watched gross margins, a measure of earnings for each dollar of revenue, fell to 16.3 per cent from 17.4 per cent.

The company that once dominated EVs is also facing fierce competition for the first time.

This year, Chinese EV maker BYD announced it had developed an electric battery charging system that can fully power a vehicle within minutes. And Tesla’s European rivals have begun offering new models with advanced technology that is making them real alternatives, just as popular opinion in Europe has turned against Mr Musk.

Investors expect Tesla will be hurt less by the Trump administration's tariffs than most US car companies because it makes most of its cars domestically. But Tesla will not be completely unscathed. It sources some materials for its vehicles from abroad, which will now face import taxes.

Tesla warned that tariffs will hit its energy storage business, too.

“While the current tariff landscape will have a relatively larger impact on our energy business compared to automotive, we are taking actions to stabilise the business in the medium to long-term and focus on maintaining its health,” the company said.

Retaliation from China will also hurt Tesla. The company was forced this month to stop taking orders from mainland customers for two models, its Model S and Model X. It makes the Model Y and Model 3 for the Chinese market at its factory in Shanghai.

The company side-business of selling “regulatory credits" to other car makers that fall short of emission standards boosted results for the quarter.

The company generated $595 million from credit sales, up from $442 million a year ago.