Tesla stock plunges after worst revenue fall in over a decade as EV tax breaks fade

Tesla's stock price dropped sharply in early trading Thursday after the electric car company reported its worst quarterly revenue drop in more than ten years, according to The New York Times coverage of the earnings announcement. The company's boss, Elon Musk, warned investors that Tesla might face several difficult months ahead as the business deals with various challenges. Tesla shares fell as the company struggled with lower sales and growing competition from other electric vehicle makers.

The problems Tesla faces are similar to those affecting traditional car companies, which usually have much lower stock values than Tesla currently holds. As reported by The New York Times, Tesla pointed to uncertainty in the economy caused by changing trade policies and unclear government spending plans as major concerns. Chinese car companies are creating strong competition for Tesla, while fewer people want to buy electric vehicles in important markets. The situation became worse when the Trump administration decided to end tax credits that helped American buyers purchase electric cars, making Tesla vehicles more expensive for customers.

Tesla's financial results showed the company missed expectations for both revenue and profits, with car sales revenue falling 16 percent compared to the same period last year to $16.7 billion, as detailed in CNBC's earnings analysis. During a call with financial analysts, Musk explained that Tesla probably could have a few tough quarters ahead because the federal tax credits for electric vehicles are ending. He said he was not certain this would happen, but admitted it was possible given the current situation.

According to Bloomberg, Tesla has been dealing with stronger competition in key markets like China and Europe, especially from Chinese electric vehicle companies that sell cars at lower prices. According to CNBC's reporting, new information from the European car industry group showed that Tesla's new car registrations went down in June across Europe. Tesla's stock has performed poorly this year, falling nearly 18 percent before Thursday's additional decline. Along with pressure on Tesla's main car business, Musk's political activities have also drawn attention from investors and the public.

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The company has been working on releasing a cheaper car model to update its aging vehicle lineup and hopefully increase sales again, according to Investor's Business Daily's market analysis. Tesla management said they started making limited numbers of the more affordable model in June and expect to increase production in the second half of the year. However, the outlook for the rest of the year remains unclear because Tesla did not provide official guidance about future performance, which is different from earlier this year when management said Tesla would return to growth in 2025.

A senior analyst at Morningstar explained that management initially expected delivery growth in 2025, but the lack of guidance suggests they no longer forecast volume growth. As covered by Investor's Business Daily, this matches expectations that deliveries will actually decline in 2025.

The Dow Jones stock index also dropped on Thursday due to unexpected changes in weekly unemployment claims, with both Chipotle and Tesla stocks falling significantly after their earnings reports. Despite the challenges, Musk tried to encourage investors by claiming that new technologies like self-driving taxis and robot workers would make Tesla the most valuable company in the world.