Tesla’s Quarter Was Pretty Brutal. Here’s What Happened

• Tesla’s revenue was down 12% year-over-year in the second quarter of 2025. Operating income was down 42%.
• The drops are due to a mix of factors: declining sales, discounted prices and fewer energy regulatory credits among them.
• The company needs a positive growth story again, and soon, analysts say.

What went right for Tesla in the second quarter of 2025? According to its latest earnings report, not a whole lot.

Ahead of its quarterly call with investors today, the Texas-based electric automaker tallied up the ramifications of a double-digit decline in global sales and other challenges. Those include its revenue being down 12% year-over-year, operating income being down 42% year-over-year and a big drop in the regulatory credits that usually generate billions of dollars and may well be going away soon. 

“Our priorities remain the same: delivering affordable and compelling autonomy-capable models that maximize our global fleet of vehicles as our autonomy software continues to rapidly progress, growing the Energy business and advancing our robotics efforts,” the automaker said in its statement. 

Unfortunately, that plan hinges on selling cars, and Tesla is running into real trouble there.

In July, the carmaker said it delivered some 384,000 cars globally in the second quarter, a 14% year-over-year drop. That followed a similar slip in Q1 and an essentially flat year of sales in 2024. In Q2, Tesla said its automotive revenues fell by 16% to $16.7 billion. The company has lathered on incentives like free subscriptions to Full Self-Driving Supervised and free Supercharging to help move cars. 

Adding insult to injury, Tesla noted that is average selling price per model slid in the most recent quarter. Revenue from its energy storage business fell too.

And critical sales of regulatory credits fell by around half to $439 million, making up a large portion of Tesla’s $900 million operating income for the quarter. That regulatory credit business is expected to mostly dry up imminently; the Trump administration and Congress are working to neuter the federal tailpipe emissions rules that push auto companies to buy credits from Tesla and other EV makers. 

This is a breaking news post. It will be updated.