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Tesla (NASDAQ: TSLA) just reported first quarter (Q1) earnings, and they weren’t exactly great. The EV maker posted adjusted earnings per share (EPS) of $0.27 on group revenue of $19.3bn. The average Wall Street analyst estimate was for $0.41and $21.3bn, respectively. Yet the Tesla share price is doing its famous levitating act in after-hours trading. As I write, it’s set to open 5% higher!
As well as misses on both sales and earnings, Tesla pulled guidance for 2025, saying it will revisit the outlook in Q2. This is hardly surprising given all the uncertainty around tariffs right now.
But perhaps the share price reaction was surprising to some. So, why is the share price set to rise rather than crash?
A few reasons
The headline news is that CEO Elon Musk will soon be spending less time at the Department of Government Efficiency (DOGE). Starting in May, he will be spending “far more” of his time at Tesla.
Meanwhile, the pilot launch of robotaxis is still set to happen in June in Austin, Texas. The fully autonomous cars doing paid rides will be Model Ys. Then robotaxis will be in many other US cities by the end of 2025, according to Musk.
Another positive is that supply chain risk isn’t as high as it is for other carmakers. That’s because Tesla has been localising supply chains for a few years now. In other words, most components are sourced from the continent where the cars are built (America, Europe, or China).
While Q1 automotive revenue dropped 20% year on year, overall revenue was down just 9% to $19.3bn. I think there might be relief that the top line only contracted by single digits, even if the operating margin fell to just 2.1%, from 5.5% a year earlier.
Tesla’s CFO also confirmed that the firm is working on entry into India. That could deliver a meaningful boost to future sales as the country has an enormous middle class (but also big car tariffs too). On the plus side, most Indians probably don’t care about Musk’s politics.
Finally, Tesla said it’s still on track to release more affordable models later this year. I think these things are why the share price isn’t crashing, despite weak car sales.
Caveats
As always with Tesla though, there were a few caveats.
One is that Musk will still be at DOGE for one or two days a week beyond May, and will likely be associated with it for the rest of Trump’s time in office. He says that the future of America — and therefore Tesla too — is at risk if colossal national debt isn’t drastically reduced.
Plus, any “material” effect on the bottom line from robotaxis and custom-built Cybercabs won’t be until the second half of 2026. Meanwhile, the plan is for 1m Optimus robots per year “by 2030, maybe 2029“. So those are still some way off.
I’d encourage people to look beyond like the sort of bumps and potholes of the road immediately before us, but lift your gaze to the bright-shining citadel on the hill.
Elon Musk, Q1 2025 earnings call.
I can certainly picture the bright-shining citadel on the hill if robotaxis scale globally. But with the stock still trading well above 100 times earnings, Tesla is too risky for me.
