Tesla's Annual Profits Plunge 46% Amid Sales Slump and Musk's Political Fallout
Tesla has reported a dramatic 46% drop in annual net income to $3.8 billion (£3bn) for 2025, marking its lowest profit level since the pandemic and the second consecutive year of severe declines. The electric vehicle giant, once the world's largest EV maker, has lost that crown to a Chinese rival while grappling with significant sales boycotts linked to Elon Musk's political activities.
Financial Performance and Market Challenges
The company disclosed these figures on Wednesday 28 January 2026, revealing that fourth-quarter net income also fell sharply by 61% to $840 million, or 24 cents per share. Excluding one-off charges, adjusted earnings reached 50 cents per share, slightly exceeding analysts' forecasts of 45 cents. Despite the introduction of more affordable models, Tesla faces mounting competition and what analysts describe as "general brand destruction."
Sam Abuelsamid, an analyst at Telemetry, commented: "They've got aging product that is less and less competitive as other manufacturers come out with new models, then there is the general brand destruction. Musk's involvement in politics has turned off customers." The financial setback represents a stark reversal from a year ago, when investors had driven up Tesla's stock anticipating benefits from Musk's advisory role in President Donald Trump's administration.
Investor Confidence and Future Vision
Remarkably, Tesla's stock has risen 9% over the past year as investors maintain confidence in Musk's long-term vision. The CEO has urged shareholders to look beyond current car sales toward what he describes as a groundbreaking future of robotaxis and domestic robots. This optimism persists despite Musk's announcement of his exit from Trump's government, following a year where he headed a cost-cutting team in Washington.
Dan Ives of Wedbush Securities, a prominent bullish analyst, predicts robotaxis will operate in over 30 cities by the end of this year, with Tesla capturing 70% of the global self-driving car market within a decade. Tesla recently announced the removal of safety drivers from its Austin robotaxi service, launched in June, and vows aggressive expansion into other cities.
Political Backlash and Unfulfilled Promises
The profit plunge follows a year of political controversy that backfired commercially. Customers angered by Musk's work for President Trump and his right-wing political stances organized boycotts against the brand. Additionally, Musk's pledge a year ago that European regulators would approve Tesla's partial self-driving software within three months—a move that could have significantly boosted European sales—failed to materialize.
One positive note emerged from Tesla's gross profit margins, which improved to 20% last quarter from 16% a year ago. The company's energy storage business also posted strong results, with revenues surging 25% to $3.8 billion last quarter, benefiting from massive demand as energy-hungry data centers are built across the US.
Future Distractions and Market Speculation
Attention now turns to whether Musk can maintain his renewed focus on Tesla. With plans to take his rocket company SpaceX public potentially in June—an IPO widely expected to be blockbuster and possibly make him the world's first trillionaire—there are concerns about divided attention. Investors and analysts await further details on Tesla's ambitious plans during a conference call later today, as the company navigates this critical transition from traditional automaker to futuristic mobility provider.
