Tesla is grappling with declining vehicle sales, shrinking profits, and looming cuts in revenue from regulatory credit sales due to Republican-led policy changes.
Musk’s Vision vs. Market Reality
Despite recent disappointing earnings, CEO Elon Musk remains bullish. On the company’s earnings call, Musk projected that Tesla’s electric vehicles will soon become fully driverless, generating income for owners even while they sleep. He also revealed plans to expand Tesla’s robotaxi service beyond its limited testing in Austin, Texas, aiming to reach half the U.S. population by year-end—pending regulatory approval.
However, these futuristic promises failed to assuage investors. Tesla’s shares plunged 8% on Thursday as market concerns centered on immediate challenges: a surge in lower-cost electric vehicle competitors—especially from China—and a political backlash harming Tesla’s brand in the U.S. and Europe.
Tesla’s automotive sales fell 16% year-over-year in Q2, with weak performance notably in Europe and California. Musk cautioned that “a few rough quarters” may lie ahead due to the expiration of federal EV credits and tariffs imposed by President Donald Trump.
Although the stock partially recovered on Friday with a 3.5% gain, Tesla has still fallen 22% this year—the poorest showing among major tech giants. In contrast, the Nasdaq rose 1% for the week and is up over 9% in 2025, closing at record highs.
Analyst Reactions
Canaccord Genuity analysts remain optimistic about Tesla’s future in AI and robotics, calling robotaxis a “future-forward opportunity” while emphasizing the need for improved near-term profitability. Meanwhile, Jefferies described the earnings as “a bit dull,” and Goldman Sachs noted that Tesla’s robotaxi program is still in its infancy with limited technical data.
Tesla did not respond to requests for comment.
Musk, who describes himself as “pathologically optimistic,” has historically inspired shareholders with bold visions of self-driving cars, humanoid robots, and affordable EVs. But after a decade of missed deadlines for autonomous driving, Tesla is losing ground to rivals like Alphabet’s Waymo in the U.S. and Baidu’s Apollo Go in China.
Tesla’s shareholder presentation emphasized the company’s transition from an electric vehicle and renewable energy leader to a major player in AI, robotics, and related services. Yet, it offered no new growth or profit guidance for the coming year.
Regulatory and Operational Hurdles
Tesla recently informed staff that its robotaxi service could launch in San Francisco as soon as this weekend. However, Tesla has not applied for the necessary permits from California’s Department of Motor Vehicles and Public Utilities Commission (CPUC) to operate a fully driverless ride-hailing service.
The CPUC clarified that under current permits, Tesla can only operate a human-driven chartered vehicle service, not driverless robotaxis.
Musk and Tesla executives said they are pursuing regulatory approvals in Nevada, Arizona, Florida, and other states, but provided no details.
In Austin, Tesla’s robotaxi service has driven 7,000 miles with a small fleet of 10–20 Model Y vehicles restricted to roads with speed limits up to 40 mph. These vehicles feature Tesla’s latest self-driving software but are supervised remotely by employees and have a human safety driver ready to intervene.
Comparing Tesla to Competitors
Alphabet reported on the same day that its Waymo Driver has now autonomously driven over 100 million miles on public roads, testing in more than 10 cities including New York and Philadelphia. Waymo has become significant enough for Alphabet to categorize its autonomous transportation services as part of its “Other Bets” revenue segment, which generated $373 million in the quarter.
Despite skepticism, Musk remains confident. He tweeted that Tesla could someday be worth $20 trillion. On the earnings call, he claimed Tesla’s AI capabilities for cars and robots are “much better than Google by far” and “much better than anyone at real world AI.”
Alphabet recently updated its figure on autonomous miles driven by Waymo’s fleet to over 100 million miles on public roads. Previous reports misstated the number of miles driven.
Author’s Opinion
Tesla’s AI and robotaxi ambitions capture the imagination but remain years behind competitors with more mature technology and regulatory approval. While Elon Musk’s grand visions rally investors, the company must deliver tangible progress in sales, profitability, and autonomous capabilities to justify the hype. Betting too heavily on future tech risks alienating shareholders focused on today’s financial health.
Featured image credit: Gage Skidmore via Flickr
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