Tesla profit tanked 46% in 2025

In a significant downturn, Tesla reported a staggering 46% drop in profit for 2025 compared to the previous year. This decline comes as CEO Elon Musk took on a new role in the Trump administration, coinciding with the elimination of federal electric vehicle subsidies by Congress, which severely impacted sales. The electric vehicle manufacturer disclosed on Wednesday that its profit for the year plummeted to $3.8 billion, marking the lowest figure in recent years. Furthermore, revenue from car sales fell by 11% year-over-year, raising concerns among investors. Tesla managed to ship 1.63 million vehicles worldwide in 2025, but this represents a second consecutive year of declining sales, contradicting Musk’s earlier commitments of achieving an average annual growth rate of 50%. As Tesla navigates these challenges, the company is striving to divert investor attention from its struggling automotive division. "2025 was a pivotal year for Tesla as we advanced our mission and continued our shift from a hardware-focused operation to a physical AI company," stated the company in its shareholder letter. In a move to reinforce this shift, Tesla revealed it has invested $2 billion into Musk's artificial intelligence venture, xAI, as part of the startup's Series E funding round. Despite the overall downturn, there were some positive developments. Revenue from Tesla's solar and energy storage sectors saw a 25% increase compared to 2024, while service revenue, which encompasses Full Self-Driving software payments, insurance, parts, and Supercharging, rose by 18%. Additionally, the company succeeded in expanding its gross margin in comparison to previous quarters. Anticipated projects, such as the Tesla Semi and the Cybercab, are expected to commence production in the first half of this year, offering a glimmer of hope amid the current challenges. This story continues to evolve.