Photo-Illustration: Intelligencer; Photo: Getty Images
Tesla’s first quarterly report of 2025 is its gloomiest since 2022, when the company was battling with COVID supply constraints and its CEO was dumping stock to finance his acquisition of Twitter. The company’s net income is down 71 percent, missing analysts’ already lowered expectations. It’s selling fewer cars and making less money on each one. Customers are starting to see its most popular vehicles as stale, while its last fully new vehicle, the Cybertruck, is the biggest automotive flop in decades. The company is making long-term investments in AI and autonomous vehicles (its risky plan for the future), meanwhile demand for EVs in general is softening (Tesla’s financial reality for now). It’s still dependent on carbon credits sold to other automakers to remain profitable, which it is, narrowly. Plus there’s a trade war going on.
Some of these issues are important, as Tesla was eager to tell shareholders this week. But one additional factor outweighs all of the rest combined, and its name is Elon Musk. As The Wall Street Journal reported:
Musk said on Tesla’s first-quarter earnings call on Tuesday that he would be allocating more time to Tesla starting next month “now that the major work of establishing the Department of Government Efficiency is done …”
The timing might seem to suggest that Musk’s distracted driving is the main reason for Tesla’s woes. But the results actually confirm that Musk’s controversial work with the Trump administration has tarnished Tesla’s image with many prospective buyers. The company pointed to “changing political sentiment” as a factor affecting demand in its letter to shareholders Tuesday.
Tesla finds itself in a genuinely strange position here. On the one hand, the company has some fairly serious challenges, some of which might benefit from the attention of an energetic and focused chief executive with a major stake in the firm. On the other hand, Tesla’s chief executive is the source of the company’s most obvious problem, which is that many of its current and potential customers now associate Teslas not with virtuous EV early adoption but with rising right-wing authoritarianism, haphazard government cuts, billionaire seed-spreading, and more generally being an asshole in public.
Elon Musk has single-handedly managed to turn Tesla’s lineup of competent, anodyne, popular cars into Cybertrucks, reputationally speaking, which makes Musk’s stated intention to refocus on the company, and to spend a bit less time trying to take apart and take control of the United States government, hard to value. Will it help, or is it more like a threat? Shareholders and analysts, who agree on the broad diagnosis that Elon Musk is the problem, are divided on whether Tesla needs more or less of him. Analyst and longtime Tesla booster Dan Ives says that while “Tesla has essentially become a political symbol globally,” which has been a drag on sales, “it is time for Musk to step up, read the room, and be a leader in this time of uncertainty.” His prescription: more Elon, but better somehow.
Investor Ross Gerber, another longtime Tesla bull, was publicly flirting with the idea of Musk stepping aside before the latest earnings report and is claiming vindication now:
I’ve done Tesla calls for 11 years. This is the worst performance I’ve seen in Tesla’s history. I get Elon will tell everyone about trillions of TAM and robots taking over the world… anything to get you not to look at the facts. As Elon darts off to xAI after he announces he is…
— Ross Gerber (@GerberKawasaki) April 22, 2025
The idea that someone else could better run Tesla, the car manufacturer, is plausible enough, as is the theory that distancing the brand from Musk could mitigate some reputational damage. Again, Tesla is America’s leading EV manufacturer, and while EV growth has stalled for the moment, the world is trending electric. Tesla also has control over the best charging infrastructure by far — with no clear competition in the near or medium term. The company isn’t insulated from tariffs and supply-chain issues, but it’s better off than some of its competitors. An uncontroversial leader would have a lot to work with, in other words, if their ambitions were to sell more cars and stay in the autonomous race.
But Tesla isn’t really a car manufacturer, at least as far as markets are concerned. It’s barely inside the top-20 global car companies by volume, but it’s by far the most valuable car company in the world. This is partly because it’s one of the purest and most straightforward ways to invest in EVs, which plenty of people believe is a generally good idea, and in self-driving cars. But a great deal of its valuation, even now, is due to Musk. Tesla, as Musk’s only publicly traded company, is buoyed by his broader portfolio of companies; if you want to invest in the Musk empire and you’re not an institutional investor or VC, this is the way. That the stock rose on Musk’s claim that he’d be spending more time on the company suggests that, for all the damage he’s done to the Tesla brand, his own prospects — at least as far as a critical mass of investors are concerned — are still seen as pretty good.
Tesla’s value, in other words, is becoming even more divorced from what conservative investors would describe as its fundamentals. Valued as a car company, Tesla is probably worth about a fifth of where it trades. Valued as a car company with plans for autonomous vehicles and a CEO who is claiming it will soon be a general-purpose robotics firm above all, the market still thinks it’s worth nearly a trillion dollars. Musk might have tanked Tesla’s brand, and his own popularity has taken a massive hit as well. (It’s clear and notable that X and Tesla, his two businesses most exposed to actual consumer sentiment and choice, are his two most imperiled at the moment.)
But as far as investors are concerned, Musk’s value, however one might describe it, hasn’t collapsed. It recently drove the valuation of xAI high enough that the company was able to absorb and bail out X. It’s too soon to say for sure, but Musk’s political turn might have helped secure government business for SpaceX. Still, at least in aggregate, Tesla investors seem as receptive as ever to a pitch that Musk has been making for a while, and which plenty of sober analysts have characterized as a repetitive and desperate ploy, and which might sound spectacularly strange to a lot of people in 2025: not to think of Tesla as a car company but as a vehicle for investing in him. For now, despite everything, that’s still what they’re doing.
