Tesla share price leaps 8% despite 71% drop in Q1 net profit after CEO Elon Musk vows to reduce DOGE time
Tesla share price leapt nearly 8% on Wednesday after the EV-maker reported better-than-expected profit for its core auto business. CEO Elon Musk said he would step back from his involvement in the Trump administration to focus on running his numerous companies.
Elon Musk vowed to pull back “significantly” from his work with the US government and pay more mind to Tesla Inc., assuaging investors concerned about the carmaker’s worst quarter in years.
The chief executive officer will devote “far more” of his time to Tesla starting next month, saying during an earnings call Tuesday that his work establishing the so-called Department of Government Efficiency will be “mostly done.”
Tesla’s stock climbed 3.8% at 9:36 a.m. Wednesday, despite first-quarter results that underscored weakness in the company’s core automotive business and tariff headwinds for its expanding energy operations. The carmaker missed analysts’ estimates for both revenue and earnings, and management backed away from earlier predictions that vehicle sales will return to growth this year.
Wall Street has soured on Musk’s political activities, which have alienated core customers and done serious damage to Tesla’s brand. The CEO’s fortune shrunk by $116 billion in the first quarter, his biggest quarterly drop on record, according to the Bloomberg Billionaires Index.
Tesla cautioned that while it’s making investments to position its vehicle business for growth, its prospects depend on factors including the broader macroeconomic environment. The company will revisit its outlook for volume when reporting second-quarter results.
The plan for capital expenditures this year was also pared, with the automaker warning that changes in trade policies may set back its timelines for unspecified projects.
Musk said several times on the call that he’s pushed for lower tariffs, acknowledging differences with Trump on the topic. The president’s moves to hike duties on imported goods have spooked investors and raised concerns of higher prices for US consumers.
Musk said he’ll likely continue to work with Trump’s administration for the remainder of the president’s term, albeit on a more limited basis. He’s poised to hit the 130-day limit for his role as a special government employee as early as next month.
Trump’s tariffs have compounded Tesla’s challenges, even though all the vehicles it sells in the US are assembled domestically. Duties on auto parts shipped in from Canada and Mexico are slated to take effect next month and will hit the company’s profitability.
Musk told analysts that Tesla has been working on localizing its supply chains to help ease logistics and minimize risks of higher costs.
“We are, I think, the least affected car company with respect to tariffs,” he said. “That puts us in a stronger position than any of our competitors.”
Ben Kallo, a Baird analyst with the equivalent of a buy rating on Tesla’s stock, said the mentions of tariffs were a means to alerting policymakers of the pain the levies are causing.
“It’s a way to get the message across that tariffs are going to impact Elon without him saying that as part of the US government,” Kallo said. “He’s walking a tight rope there while part of the government with DOGE.”
Tariffs will have a bigger impact on Tesla’s energy business. The company’s Megapack energy-storage systems heavily rely on battery cells from China, which accounted for 84% of global lithium-ion battery production capacity in 2024, according to research firm Wood Mackenzie. By comparison, North America made up just 5%.
In its earnings presentation, Tesla warned that “changing political sentiment could have a meaningful impact on demand for our products in the near term.” Musk told analysts that protests against his company are “organized and paid for,” without offering details or evidence.
“Volunteer hosts and participants are stepping forward because they believe in democracy and the rule of law, not because an unknown billionaire is paying them,” the group said. “The irony is rich coming from a man who spent $277 million to get Donald Trump elected and $21 million meddling in a failed attempt to sway Wisconsin for his own benefit.”
Musk is increasingly betting Tesla’s future on autonomy and artificial intelligence, with the company developing a driverless taxi called Cybercab and the humanoid robot Optimus.
New vehicles, including more affordable models, remain on track for the start of production in the first half of this year, the company said, rebutting a Reuters report last week citing launch delays. Lars Moravy, the vice president of vehicle engineering, said the affordable vehicles will resemble other Tesla models.
Tesla said it prepared its factories for the launch of new models while switching production lines over for the refreshed Model Y early this year. The company’s launch of an autonomous vehicle ride-hailing service, scheduled for June in Austin, will start with 10 to 20 vehicles and scale from there, Musk said.
