Tesla's auto business weakens, free cash flow turns negative, Musk accelerates deployment of AI, humanoid robots
, this car company helmed by Elon Musk has significantly cut prices to boost electric vehicle sales and oversold to competing products. Revenue dropped sharply, and net profit in the second quarter was lower than expected and unexpectedly lower. Texas-based Tesla reported earnings on Wednesday: For the three months ended June, It fell 17% year-on-year to US$1.2 billion, well below Wall Street's consensus estimate of US$1.9 billion. Although new car deliveries hit a record high of 480,126 units this quarter, driving revenue up 26% year-on-year to US$28.2 billion. Revenue performance was better than market expectations, but profits still declined beyond expectations. After the financial report was released, Tesla's stock price fell 4% after hours. This performance highlights Tesla's current business situation: after sales fell sharply last year, the company relied on price cuts to regain customers; and Musk was deeply involved in the Trump administration's efforts to reduce federal spending, which once triggered consumer resistance and dragged down sales. Capital markets analyst Tom Narayan said that Tesla's automotive business profit margins continued to narrow, which is enough to prove that the surge in deliveries this quarter was largely due to price cuts. After excluding carbon credit revenue, the gross profit margin of the automotive business was only 16.3%, lower than the average analyst estimate of 18.7% according to market data agency Visible Alpha; the company's overall operating profit margin fell sharply to 1.4% from 4.1% in the same period last year. The recovery in sales is most obvious in Europe, where high gas prices have also encouraged some consumers to switch to electric vehicles. The US market is in a difficult situation: the Trump administration has cut the US$7,500 electric vehicle tax credit and abolished many incentive policies to support the production of electric vehicles. Tesla’s revenue from selling carbon credits to help other car companies offset emissions compliance costs plummeted to $146 million from $439 million in the same period last year. The automotive business still contributes over 70% of Tesla's revenue. Faced with pressure on the entire vehicle sector, Musk has accelerated the company's strategic transformation: from electric vehicle business to self-driving taxis and AI humanoid robot tracks. In order to increase its investment in artificial intelligence and robotics, Tesla’s capital expenditures this quarter more than doubled year-on-year. The huge investment also led to the company’s first quarterly loss in two years. , the cash gap reached US$1.1 billion. Musk told investors on Wednesday's earnings call that the company is still on track to invest more than $25 billion in 2026, nearly three times last year's $8.5 billion in capital expenditures. The world's richest man described this large-scale investment plan as: "Perhaps the fastest-growing industrial layout for American companies since World War II." Musk also cited data that the world's largest technology companies plan to invest more than US$725 billion in building AI infrastructure this year to support the rationality of Tesla's transformation strategy. Tesla’s capital expenditures this quarter were US$5.79 billion, a 142% year-on-year increase. Net profit calculated in accordance with U.S. Generally Accepted Accounting Principles (GAAP) was US$1.1 billion, a year-on-year decrease of 5%; this caliber includes equity incentive expenses, as well as value fluctuations in Tesla’s cryptocurrency and SpaceX-related investments. Tesla Chief Financial Officer Vaibhav Taneja said the company's capital expenditures will continue to grow in the next two to three years. He added that in addition to its own cash, Tesla has been approved for a credit line totaling US$30 billion, which can be withdrawn at any time to accelerate investment in related fields. Tesla is simultaneously promoting a number of heavy asset investments: jointly building the Terafab semiconductor R&D factory with SpaceX, purchasing high-end chips for the Cortex 2 supercomputer cluster, and laying out power grid supporting infrastructure. In February this year, Tesla’s fully autonomous self-driving taxi Cybercab was officially put into production; at the same time, the company launched small-scale self-driving taxi operation services in Texas and Florida. Musk admitted that the self-driving taxi business will not generate substantial revenue until next year at the earliest.