Energy, AI & Hype, Can Tesla Rely on Moonshots Alone?
Well , Tesla’s year is unraveling faster than many expected. In its Q2 FY25 earnings report, the company posted its steepest delivery decline on record, a 13% year over year drop, totaling just 384,000 vehicles. Revenue also slid 12% to $22.5 billion, while margins continued their downward trend.
The automotive division, which accounts for 74% of Tesla’s total revenue, was hit hardest, with sales falling 16% compared to last year. Despite a modest rebound in auto gross margins from Q1 (now at 15%, excluding credits), the long standing price advantage Tesla once held is being eroded by increased competition and sustained price cuts.
Meanwhile, Tesla’s cash generation is starting to show signs of stress. Operating cash flow dropped 30% year over year to $2.5 billion, and free cash flow cratered by 89%, landing at just $100 million. A rise in capital expenditures ,up 19% quarter over quarter contributed to the squeeze, though Tesla is now guiding for lower full year CapEx, from $10 billion down to $9 billion
With the company’s ability to self fund future projects now in question, investors are growing concerned that Elon Musk’s ambitious plans may face delays or require external financing.
Not all of Tesla’s businesses are faltering. The energy segment, which includes solar products and energy storage, rose modestly and now makes up 22% of the company’s total gross profit boasting a strong 30% margin, the highest among all Tesla units. Similarly, its services and other business (charging, repairs, parts) has remained profitable for 13 consecutive quarters.
But even with these bright spots, they are not large enough to offset the overwhelming pressure from declining vehicle demand, especially as Tesla continues to rely so heavily on its automotive segment.
Further muddying the waters is Elon Musk’s growing political involvement. Just weeks after vowing to refocus on Tesla following his departure from DOGE (Department of Government Efficiency), Musk announced the creation of a new political entity, the “America Party.” The move has already sparked backlash, escalating his feud with Donald Trump and drawing negative sentiment from the public , with 77% of Americans rejecting the idea. Investors, hoping for renewed operational focus, are now grappling with a CEO seemingly more involved in political posturing than product pipelines
Musk has insisted that "autonomy is the story" a reference to Tesla’s long standing bet on AI, robotics, and its upcoming robotaxi platform. While there’s no denying the massive upside of a successful robotaxi rollout, those benefits are still several years away and will likely face significant regulatory hurdles before becoming revenue-generating realities.
In the meantime, falling EV demand and shifting consumer sentiment could continue to chip away at Tesla’s brand strength, a vital ingredient for any future moonshots.
With TSLA stock now down more than 30% from its December 2024 highs even as the broader market hits new all time highs, the disconnect between Tesla and the rest of Big Tech is becoming harder to ignore. Unless Tesla can stabilize its core auto business, curb distractions, and deliver concrete progress on autonomy and energy, the stock’s premium valuation will continue to come under pressure.
For investors, the question now is not just whether Tesla can innovate, but whether it can focus.
Well , Tesla’s year is unraveling faster than many expected. In its Q2 FY25 earnings report, the company posted its steepest delivery decline on record, a 13% year over year drop, totaling just 384,000 vehicles. Revenue also slid 12% to $22.5 billion, while margins continued their downward trend.
The automotive division, which accounts for 74% of Tesla’s total revenue, was hit hardest, with sales falling 16% compared to last year. Despite a modest rebound in auto gross margins from Q1 (now at 15%, excluding credits), the long standing price advantage Tesla once held is being eroded by increased competition and sustained price cuts.
Meanwhile, Tesla’s cash generation is starting to show signs of stress. Operating cash flow dropped 30% year over year to $2.5 billion, and free cash flow cratered by 89%, landing at just $100 million. A rise in capital expenditures ,up 19% quarter over quarter contributed to the squeeze, though Tesla is now guiding for lower full year CapEx, from $10 billion down to $9 billion
With the company’s ability to self fund future projects now in question, investors are growing concerned that Elon Musk’s ambitious plans may face delays or require external financing.
Not all of Tesla’s businesses are faltering. The energy segment, which includes solar products and energy storage, rose modestly and now makes up 22% of the company’s total gross profit boasting a strong 30% margin, the highest among all Tesla units. Similarly, its services and other business (charging, repairs, parts) has remained profitable for 13 consecutive quarters.
But even with these bright spots, they are not large enough to offset the overwhelming pressure from declining vehicle demand, especially as Tesla continues to rely so heavily on its automotive segment.
Further muddying the waters is Elon Musk’s growing political involvement. Just weeks after vowing to refocus on Tesla following his departure from DOGE (Department of Government Efficiency), Musk announced the creation of a new political entity, the “America Party.” The move has already sparked backlash, escalating his feud with Donald Trump and drawing negative sentiment from the public , with 77% of Americans rejecting the idea. Investors, hoping for renewed operational focus, are now grappling with a CEO seemingly more involved in political posturing than product pipelines
Musk has insisted that "autonomy is the story" a reference to Tesla’s long standing bet on AI, robotics, and its upcoming robotaxi platform. While there’s no denying the massive upside of a successful robotaxi rollout, those benefits are still several years away and will likely face significant regulatory hurdles before becoming revenue-generating realities.
In the meantime, falling EV demand and shifting consumer sentiment could continue to chip away at Tesla’s brand strength, a vital ingredient for any future moonshots.
With TSLA stock now down more than 30% from its December 2024 highs even as the broader market hits new all time highs, the disconnect between Tesla and the rest of Big Tech is becoming harder to ignore. Unless Tesla can stabilize its core auto business, curb distractions, and deliver concrete progress on autonomy and energy, the stock’s premium valuation will continue to come under pressure.
For investors, the question now is not just whether Tesla can innovate, but whether it can focus.
Note
Trump denies plans to cut subsidies to Elon Musk’s companies, says he wants Elon and US businesses to “THRIVE like never before.” OKTrade active
Tesla board has approved a 96 million share stock award to Elon Musk
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🟣MasterClass moonypto.com/masterclass
🟢Signal moonypto.com/signal
🔵News t.me/moonypto
⚪ t.me/moonyptofarsi
🟢Signal moonypto.com/signal
🔵News t.me/moonypto
⚪ t.me/moonyptofarsi
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.