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World of Software > News > Tesla’s real struggles have only just begun
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Tesla’s real struggles have only just begun

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Last updated: 2025/07/07 at 4:36 PM
News Room Published 7 July 2025
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Tesla used to be the envy of the auto world, with sky-high valuations, a relentless focus on tech, and a CEO that commanded unprecedented loyalty from his customers.

Now the company’s reputation is in shambles, its financial future looks increasingly grim, and its costly bets on AI and robotics are unlikely to pay off anytime soon. Weirdly, CEO Elon Musk has only just “woken up” to the mounting crisis on his doorstep. That’s according to an unnamed “former Tesla executive,” who told the Financial Times that Musk has only just now come to terms with the damage his political activities are creating for Tesla.

The passage of President Donald Trump’s “Big Beautiful Bill” seems to have been the final straw for Musk, who vehemently opposed the bill, calling it “an abomination” on the basis that it would balloon the national deficit. The bill, which was signed by Trump over the weekend, would eliminate tax credits for EV purchases, zero out fines for automakers who exceed fuel-efficiency targets, and roll back other incentives for wind and solar power.

Musk was so steamed about the bill’s passage he declared his intention to create a third political party. But its Tesla that will bear the full brunt of the bill’s repercussions.

Weirdly, CEO Elon Musk has only just “woken up” to the mounting crisis on his doorstep

“This is terrible policy and a devastating blow for Tesla’s bottom line,” the executive told the Times. “It’s not just [the EPA’s CAFE standards] in a vacuum — it’s everything together: tariffs, the $7,500 consumer credit, manufacturing tax credits, charging credits and solar residential credits… Elon has finally woken up to this, but talk about a day late and a dollar short.”

Tesla stands to lose billions of dollars in regulatory credit sales as a result of the bill’s elimination of penalties for automakers who exceed emission standards. In the first quarter of 2025, the company would have reported a loss if not for credit sales, which rose 35 percent year over year to $595 million, the Times notes. The company is now scrambling to shore up regulatory credit sales in Europe and elsewhere to account for the loss in the US.

You have to feel sorry for the Tesla bulls on Wall Street, who just last week were celebrating a slightly-less-terrible-than-expected production and delivery report (only a 14 percent drop in sales, that’s not so bad!), only to run smack-dab into Musk’s declaration of the “America Party.” Tesla shares dropped 7 percent in early trading on the news of Musk’s further political entanglements.

”After leaving the Trump Administration and DOGE there was initial relief from Tesla shareholders and big supporters of the name that Tesla just got back its biggest asset, Musk,” Wedbush analyst Dan Ives wrote in a note today. “That relief lasted a very short time and now has a taken a turn for the worst with this latest announcement.”

Keep in mind, Tesla’s sales were already plummeting, thanks to Musk’s side hustle with DOGE. But the company’s finances were being kept afloat by regulatory credits — which will now all but disappear with a stroke of Trump’s pen.

Meanwhile, Musk’s spat with Trump has only accelerated Tesla’s brand crisis. Democrats, many of whom were once Tesla owners and supporters of the company’s environmental mission, have already soured on the brand as Musk grew closer to Trump. And now that he’s on the outs with the president, the company’s reputation is plummeting among Republicans. Which begs the question: who will be left to buy Tesla’s cars?

As usual, Tesla’s board has been silent on all these points. As investors continue to moan about the CEO’s thinly spread attention, the board has done exactly nothing to curb Musk’s activities. Tesla Chair Robyn Denholm vehemently denied a Wall Street Journal report from earlier this year that a CEO search to replace Musk was underway. If the company starts logging quarterly losses, we should expect those rumors to surface anew.

Musk himself seems to be on increasingly shaky ground. Trump has threatened to retaliate against him further by canceling lucrative government contracts with SpaceX and Starlink. And he has even suggested he would be open to deporting Musk — although on what legal grounds it remains to be seen.

Investors assumed that Tesla was better positioned than other automakers to weather the tough roads ahead, after Trump’s triumph made clear that EV incentives and credit sales would be on the chopping block. They didn’t anticipate how quickly the alliance between the two notoriously mercurial figures would dissolve.

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