Tesla Faces Diminishing Sales and Profits: Investors Assess Options

Tesla (NASDAQ: TSLA) investors find themselves at a crossroads. For the first time since its mass production began, vehicle sales fell dramatically last year. Notably, net income in 2024 decreased by 53% compared to 2023.

The drop in sales correlates with a slowdown in demand for electric vehicles (EVs) and escalating competition in the market. Consequently, Tesla entered a price war to capture customers, which led to reduced profit margins and subsequent declines in earnings.

After a downturn on Thursday, the Stock has slid approximately 30% in 2025. Investors now face the critical question: is this decline a chance to buy, or will the trend in falling sales and earnings persist? A key figure to watch in Tesla’s upcoming report on Tuesday, April 22, could provide clarity.

Plummeting Tesla EV Sales Raise Concerns

Tesla recently unveiled critical quarterly figures. Anticipations for first-quarter deliveries had diminished due to increased competition and public protests against CEO Elon Musk linked to his previous ties with the Trump administration.

The numbers for the first quarter were disappointing, with deliveries falling 13% year over year and production down 16.3%. Investors should focus on these results, especially when Tesla releases its comprehensive financial report later this month.

Looking back to the previous quarter, Tesla had reported a 2% increase in deliveries year over year. However, automotive revenue took a hit, declining by 8%, while operating income plummeted 23%. This indicates a significant operating margin drop of 204 basis points, equating to about 2 percentage points.

TSLA Operating Margin (TTM) data by YCharts

To assess Tesla’s core business, operating income serves as the most reliable measure. While Tesla generates significant revenue from regulatory credits, these figures do not factor into operating margins and should not influence evaluations of the fundamental business.

The ongoing downturn in operating margins is a growing concern among investors. With the significant drop in EV sales in the first quarter, if operating margin figures also lack improvement, the Stock could face further declines. Keep an eye on these figures when the company reports shortly.

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Howard Smith has positions in Tesla. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.