Elon Musk, the CEO of Tesla, has announced that he will scale back his involvement in Donald Trump’s administration due to the significant drop in the company’s profits and revenues in the first quarter of the year. This decline in financial performance is attributed to Musk’s active role as a political figure in the White House, which has led to a backlash against Tesla, impacting its sales.
In Q1 2025, Tesla experienced a 20% decrease in automotive revenue compared to the same period last year, while its profits dropped by over 70%. The company has also warned investors that the challenges could persist, as changes in political sentiment might impact demand for their products.
Musk has acknowledged that his political engagement, including his significant financial support to Trump’s re-election campaign and his leadership role in Trump’s Department of Government Efficiency (Doge) initiative, has affected his focus on Tesla. Starting next month, Musk will reduce his time commitment to the Doge initiative, dedicating only one to two days per week to government matters, provided that it remains useful and the president desires his involvement.
The controversy surrounding Musk’s political activities has led to protests and boycotts of Tesla globally. Despite this, Musk considers his work at Doge as critical, stating that the government’s fiscal issues are mostly resolved. Tesla’s overall revenue for the quarter amounted to $19.3bn, which is a 9% year-on-year decline and lower than analysts’ expectations. The company has attempted to stimulate sales through price cuts, but challenges such as Trump’s tariffs on China have also influenced Tesla’s business, raising concerns about the impact of trade policies on its supply chain and costs.
In addition to facing challenges in the automotive market, Musk has been at odds with other members of the Trump administration over trade issues, including trade adviser Peter Navarro, indicating broader policy disagreements within the administration.
Following the release of Tesla’s quarterly results, the company’s shares, which had already lost about 37% of their value year-to-date, rose by more than 5% in after-hours trading. Analysts, such as Dan Coatsworth from AJ Bell, highlight Tesla’s low expectations, fierce competition, and the risks posed by global supply chain disruptions due to Trump’s trade policies. Despite these obstacles, the firm remains focused on leveraging artificial intelligence for future growth.
Tesla’s struggles underscore the complex interplay between corporate interests and political engagement, highlighting the potential repercussions of political actions on business performance.
Source: https://www.bbc.com/news/articles/cy0x50yr46lo
