Tesla’s Profit Sinks 71% But The Stock Rises, As Elon Musk Makes Key Decision

Tesla’s (TSLA) profit in the first quarter of 2025 plunged a stunning 71 percent, as sales dropped 9 percent from the year-ago period. Despite the sales decline — and the possibility of more to come — the electric vehicle maker’s stock actually rose after the report, as Tesla CEO Elon Musk announced that he was paring back his role at the Department of Government Efficiency (DOGE). 

Tesla stock was recently down more than 50 percent from its all-time high, which was reached in December 2024, a startling plunge for one of the Magnificent 7 stocks. So the shares’ recent bounce on “less bad” news may not be so shocking, but with Musk saying that he expects to continue his role at DOGE with fewer hours, the carnage may be far from over at Tesla.

Tesla’s first-quarter sales and Musk’s key-man risk to Tesla

For the first quarter, Tesla reported sales of $19.34 billion, compared to $21.3 billion in the first quarter of 2024. But the more interesting figure is sales from cars, which plunged 20 percent in the period. Tesla reported first-quarter deliveries that missed analysts’ estimates by 14 percent, making it the lowest quarter for deliveries since the second quarter of 2022. 

The bad news may just be getting started, as consumers across the globe react to Musk’s political activities as part of DOGE and his ties to U.S. President Donald Trump. In March, car registrations plunged by high-double-digit percentages in key European markets such as France, Norway and Denmark. And it wasn’t only Europe. In China, Tesla’s second-most-important market, shipments fell 49 percent in February. In the U.S., Tesla is also facing consumer backlash, including boycotts, vandalism of Tesla vehicles and outright destruction of cars, according to various media reports. 

But while Tesla stumbles, electric vehicle sales continue to rise in Europe. The European Automobile Manufacturers’ Association said that EV registrations in its markets actually increased by 31.4 percent in January and February versus a year ago. So it’s not consumers turning away from electric vehicles; they’re turning away specifically from Tesla. 

Musk’s reduced focus on Tesla has led to slumping sales, say some investors, and even noted Tesla bull and Wedbush analyst Dan Ives called on Musk to “change course.” Musk seems to have heeded the calls, announcing that likely starting in May he would cut his time at DOGE to just one or two days a week for the rest of Trump’s term in office.

While Musk says that he’ll spend more time at Tesla, the damage to Tesla’s brand may already be done. And importantly, Musk’s announcement still doesn’t eliminate the key cause of the Tesla backlash — Musk’s ongoing association with DOGE (and more generally, Trump). So Tesla is likely to continue to suffer reputational harm due to the key-man risks presented by Musk. 

Tesla investors should remain cautious

While the massive decline in Tesla stock helps reduce the risk of buyers today, investors should consider the fact that Tesla still looks hugely overpriced by conventional valuation measures. So Musk continues to point to the future as a reason for investors to buy or continue to hold their stock. Tesla said that it’s expecting to produce robotaxis in volume in 2026, though Musk has long been cheerleading robotaxis and other promises, such as humanoid robots, to hype the stock. 

Meanwhile, the CEO’s brother, Kimbal Musk, has sold nearly $43 million in stock from November 2024 to February 2025. And he’s only one of several insiders who have been selling Tesla shares. 

So with what appears to be an arguably overvalued stock and Musk’s continued involvement with Trump, investors need to be especially careful with Tesla stock. The carnage could get a lot worse. Musk presents huge key-man risk to the company, including the massive number of shares he’s pledged. 

Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.