Tesla Faces Profit Slump and Shrinking European Market Share as Musk Warns of Rough Quarters Ahead

A tumultuous period appears to be on the horizon for Tesla, as the electric vehicle giant grapples with a noticeable decline in profits and a shrinking presence in the European market, prompting CEO Elon Musk to issue a cautionary note about the challenging quarters ahead.

Elon Musk has cautioned that Tesla might experience some challenging quarters, which comes as the US tax credit for electric vehicles (EVs) is set to expire. During an earnings call with analysts and investors, the Tesla CEO said, 'We probably could have a few rough quarters. I'm not saying we will, but we could.'

Musk's Warning: Tesla Braces for 'Rough' Quarters

'But once you get to autonomy at scale in the second half of next year, certainly by the end of next year, I would be surprised if Tesla's economics are not very compelling,' the 54-year-old billionaire added.

During the earnings call, Musk was questioned about increasing his current 13% stake in Tesla to maintain control over the company. In response, Musk indicated he desired a larger share, though not an excessive amount.

'I think my control over Tesla should be enough to ensure that it goes in a good direction,' Musk noted, 'but not so much control that I can't be thrown out if I go crazy.'

Tesla's Profitability Wanes for Third Quarter

Tesla has reported a third consecutive quarterly profit drop, with earnings reaching $1.17 billion, or 33 cents per share. This is a decrease from the $1.4 billion, or 40 cents per share, recorded during the same period last year.

On an adjusted basis, the company's earnings were 40 cents per share, aligning with Wall Street's predictions. Revenue for the April to June quarter also saw a decrease, falling from $25.5 billion (£18.83 billion) to $22.5 billion (£16.62). However, this figure still exceeded analysts' forecasts slightly. Following the earnings announcement, Tesla's shares fell by 3% in after-hours trading.

Analysts React to Tesla's Quarterly Performance

Forrester analyst Dipanjan Chatterjee, in an email to news agency AP, remarked, 'The perception of Elon Musk, its chief executive, has rubbed the sheen right out of what once was a darling and soaring automotive brand.'

Chatterjee labelled the Musk-led EV maker 'a toxic brand,' further claiming it is 'inseparable from its leader.' Referring to car sales, Morningstar analyst Seth Goldstein said, 'It appears management's focus will now shift to robotaxis and away from deliveries growth.'

The challenges for Tesla aren't limited to its profit margins; the company is also contending with a significant shift in its European market presence.

Tesla's European Market Share Dips Amidst Stiff Competition

Tesla's market share in Europe decreased for the sixth consecutive month in June, according to the European Automobile Manufacturers Association (ACEA). This decline occurred amidst a broader reduction in new car sales across the region.

Data released on Thursday by ACEA, an industry lobby group, revealed that Tesla's market share in the European Union, Britain, and the European Free Trade Association decreased to 2.8% in June, down from 3.4% in the same period last year.

Furthermore, Tesla's new car registrations in June decreased to 34,781 units, representing a 22.9% decline compared to the same month in 2024.

Factors Fueling Tesla's European Slide

These figures confirm a downward trend for the company in the region. Tesla continues to face intense competition and reputational harm stemming from Musk's inflammatory statements and his association with the Trump administration.

'We do see Tesla sales continuing to struggle across Europe. Even where sales have returned to growth, such as here in the UK, they are growing far more slowly than the overall EV market,' Ben Nelmes, founder of EV data analysis firm New AutoMotive, told CNBC by email.