The electric vehicle market in 2025 will prove to be quite significant. And not necessarily in a good way, as Tesla will be able to attest. The $7,500 federal tax credit for electric vehicles will cease to exist at the end of September 2025. This tax credit was a juicy incentive which greatly boosted the demand for EVs amongst consumers, but not anymore. On two previous occasions, similar things happened, but it did not have such a long-term (estimated?) prognosis.
Implications of a failing support structure
TeslaTSLA.O Chief Executive Elon Musk said on Wednesday that U.S. government cuts in support for electric vehicle makers could lead to a “few rough quarters” for the company before a wave of revenue from self-driving software and services begins late next year. Shares fell nearly 5% after Musk responded on a quarterly results conference call to questions about new U.S. government policies under President Donald Trump.
Musk’s electric vehicle maker posted the worst quarterly sales decline in more than a decade and profit that missed Wall Street targets, but its profit margin on making cars was better than many feared. Musk is pursuing autonomous driving to power privately owned vehicles as well as robotaxis that it plans to put into production next year. Autonomous essentially refers to the capability of a vehicle to be able to operate without any specific human intervention.
Advanced technology is used to control and also navigate the vehicle. In the meantime, it is working on a new, cheaper car, though Chief Financial Officer Vaibhav Taneja said that production would ramp up next quarter, slower than initially expected. It produced some initial units by the end of June. The company did not provide an update on its full-year deliveries forecast, citing the economy and timing of the new car rollout.
Unpacking the EV industry
The second straight quarterly revenue drop, with a 12% fall, comes despite the launch of a refreshed version of its best-selling Model Y SUV that investors had hoped would help revive demand. Consumers are familiar with the Model Y for its versatility as an electric SUV. It has an impressive range with some very advanced technology. The interior of the vehicle is also fairly spacious.
A 51% dive in sales of automotive regulatory credits, which other automakers who have difficulty complying with government emissions rules buy from Tesla, also hurt revenue and profit. Pricing and margins are important as Tesla wrestles with demand and faces falling government support. Tesla global deliveries dropped 13.5% in the second quarter, and the U.S. government later this year is cutting $7,500 tax credits for EV buyers.
A visionary goal for a futuristic Tesla
Tesla’s lineup is relatively old, despite a recent refresh of the flagship Model Y, and it faces rising competition from cheaper EVs, especially in China, and a persistent backlash against Musk’s far-right political views. The company also said it continued to expect volume production of its custom-built robotaxi – called the Cybercab – and Semi Truck in 2026. “Autonomy is the story,” Musk said on the conference call, describing plans to roll out autonomous ride hailing to about half of the U.S. population by the end of this year.
Tesla is looking for robotaxi regulatory approval in the San Francisco Bay Area, Nevada, Arizona, Florida and other places, he said, and the company is close to getting regulatory approval for supervised Full Self-Driving driver assistance software in the Netherlands. The robotaxi business was likely to have a material impact on financials around the end of next year, Musk said.
Despite the implications of all of the above on Tesla, the company seems to have some interesting plans for the future. Gaining leadership in the field of autonomous driving as well as working towards developments in the field of robotics still seem firm favorites. Plans are also in motion to utilize advancements in full self-driving technology into Tesla vehicles.