Elon Musk Says Tesla Could Face 'A Few Rough Quarters' As EV Incentives Expire And Trump Tariff Pressures Mount

Tesla Inc. TSLA CEO, Elon Musk, warned that the company was entering a challenging period as federal EV credits wind down and tariff-related headwinds begin to mount.

What Happened: During the company’s second quarter earnings call on Wednesday, Musk said, “We probably could have a few rough quarters. I’m not saying that we will, but we could. Q4, Q1, maybe Q2,” referring to the fourth quarter of 2025, along with the first and second quarters of 2026.

The company acknowledged the overlapping headwinds it is now facing during the call, starting with the expiration of the $7,500 federal EV tax credit for many of its models, towards the end of the current quarter.

See Also: Elon Musk’s Tesla Sits On $284 Million Bitcoin Windfall In Q2, Refuses to Cash Out

In addition to regulatory changes, Tesla disclosed that the tariffs imposed by President Donald Trump have increased costs by approximately $300 million from the prior quarter. Two-thirds of this impact was seen in the company’s automotives business, and less in energy, according to the company’s CFO, Vaibhav Taneja.

Taneja says, “Given the latency in manufacturing and sales, the full impacts will come through in the following quarters. So costs will increase in the near term.”

Despite all these concerns, however, Musk remains optimistic, leaning on Tesla’s autonomy play. “Once you get to autonomy at scale in the second half of next year… I’d be surprised if Tesla’s economics are not very compelling,” he said.

Why It Matters: According to senior analyst Dan Ives of Wedbush Securities, the axing of the EV tax credits would be a net positive for Tesla.

“While this is a clear negative for the EV industry at first look and would particularly hurt GM, Ford, Stellantis, and Rivian… on the flip side, we view this as a net bullish move for Tesla and Musk over time,” Ives said nearly a year ago, citing the latter’s scale relative to its peers.

Tesla released its second quarter results on Wednesday, reporting $22.5 billion in sales, an increase of 12% year-over-year, but falling short of consensus estimates at $22.8 billion.

The company posted a profit of $0.40 per share, which again missed analyst consensus estimates at $0.42 per share during the quarter.

Price Action: Tesla shares were up 0.14% on Wednesday, trading at $332.56, but are down 5.51% after hours following the earnings release.

According to Benzinga’s Edge Stock Rankings, Tesla shares score high on Growth, and have a favorable price trend in the short, medium and long term. Click here for deeper insights into the stock, its peers and competitors.

Elon Musk Tesla | Photo courtesy: Mijansk786 / Shutterstock.com

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