Electric vehicle (EV) maker Tesla reported a net income of $934 million for the first quarter (Q1) of 2025, a drop of 39% year-over-year (YoY) from $1.54 billion.

The decline in profitability was attributed to a broad operational transition involving a global production line switchover for its flagship Model Y and a broader strategic push into artificial intelligence and energy solutions.

Total revenue for Q1 was $19.34 billion, a 9% drop from the $21.3 billion posted in Q1 2024 and a $2.07 billion miss on analysts’ expectations.

The revenue drop mainly resulted from a 20% YoY reduction in total automotive revenue to $13.97 billion. The automotive revenue decreased largely due to a decline in vehicle deliveries. Tesla delivered approximately 336,681 vehicles in the quarter, a 13% drop from the prior year. This stemmed partly from factory downtime associated with the Model Y upgrade across all four vehicle production sites.

Another significant contributing factor to the revenue decline was a reduction in the average selling price (ASP) of Tesla vehicles, driven by shifts in product mix and ongoing pricing strategies aimed at maintaining competitiveness. Incentives and financing options further contributed to the ASP reduction, impacting profitability.

Tesla, however, reported stronger regulatory credit revenue and growth in other business segments, partially offsetting the automotive downturn.

Tesla’s earnings per share for Q1 2025 stood at $0.27, down from $0.45 in the prior-year quarter and missing the analysts’ expectations by $0.15.

The company reported adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $2.81 billion, representing a 17% YoY dip. This drop resulted in an adjusted EBITDA margin of 14.6%, down from 15.9% in Q1 2024. These figures underscore the cost pressures Tesla faced during the quarter, particularly concerning its investments in R&D, artificial intelligence, and operational restructuring. However, cost efficiencies and lower raw material prices provided some mitigation.

Despite lower earnings, Tesla’s financial position remained robust. The company generated $2.2 billion in operating cash flow and $664 million in free cash flow, ending the quarter with $37.0 billion in cash, cash equivalents, and investments. Disciplined capital expenditure and cash management supported the increase in liquidity.

Energy Storage

Tesla’s energy generation and battery storage business continued to show strong momentum, with revenue reaching $2.73 billion in Q1 2025, up 67% from $1.635 billion in Q1 2024. The company deployed 10.4 GWh of energy storage in the quarter. This growth reflects the sustained global demand for battery storage products, especially the company’s Powerwall and Megapack systems.

The company reported record Powerwall deployments, crossing 1 GWh in a single quarter for the first time. Although not contributing to deployed volumes, its mega factory in Shanghai produced over 100 Megapacks in the quarter.

The company’s services and other segments also expanded, generating $2.64 billion in revenue, a 15% yearly increase. Growth in this category was driven by improved non-warranty maintenance services, collision repairs, and the growing footprint of Tesla’s Supercharger network, which surpassed 67,000 connectors worldwide.

Tesla also delivered 1.4 TWh of electricity across 42 million charging sessions during the quarter, highlighting its growing presence in the energy delivery sector.

From an operational standpoint, the quarter was marked by significant achievements. Tesla simultaneously completed an industry switchover of production lines for the updated Model Y across its four global vehicle factories. This task was executed without major disruption to supply chains across three continents.

Additionally, Tesla continued to advance its full self-driving (FSD) capabilities. In Q1, the company launched FSD (supervised) in China, marking its debut outside North America.

Furthermore, in its U.S. factories, the Model 3, Model Y, and Cybertruck models could drive autonomously from the production line to outbound logistics areas, showcasing Tesla’s growing confidence in its autonomy stack.

During the earnings call, CEO Elon Musk confirmed that Tesla’s fully autonomous ride-hailing service ‘robotaxi’ will launch in Austin by June 2025.

A recurring theme was the impact of tariffs, particularly the U.S. Section 232 autotests and new LFP battery cell tariffs, which Musk acknowledged will impact profitability, especially in the energy segment. However, Tesla stressed its deep vertical integration and regional supply chains as key defensive strategies.

Musk noted that Tesla now sources 85% of its vehicle content from North America for U.S. sales, and its Shanghai and Berlin factories are also highly localized. The company is expanding domestic cell production and refining operations, including its lithium refinery in Texas and cathode plant near Giga Austin.

Looking forward, Tesla reiterated its plans to begin production of new, more affordable EV models in the first half of 2025. These models will be built on current manufacturing lines alongside existing vehicles to enable cost efficiency and capex optimization.

Tesla believes this development will allow the company to maximize the use of its estimated three million unit annual capacity while preparing for longer-term innovations such as the upcoming Cybercab and the deployment of its humanoid robot, Optimus.

Tesla posted a net income of $2.32 billion in the fourth quarter of 2024, down 71% YoY.