Tesla Should Generate a Net Loss in 2025

Auto sales will continue to slide & Trump's 145% China tariff will cause Megapack profits to slide into the red.

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• Q1 earnings miss: Tesla should see its Q1 2025 adjusted EPS drop by 33% YoY to $0.30, which is 28% below the current consensus of $0.42.

• Net loss for the full year: Due to Trump’s tariff war against China and other countries from which Tesla sources key materials, Tesla’s full-year adjusted EPS should be -$0.17 versus consensus estimates of $2.55.

• Energy business to generate losses: Unless President Trump takes down his 145% tariff on imports from China, Tesla’s flourishing energy storage business in the US should generate losses from Q3 2025 (see details below). Battery costs will rise more than Tesla can cover via price hikes.

• US cost of auto production should also rise: While Tesla has the highest local parts procurement rate in the US, it still sources 30% of its components from outside of the US, with 23% from Mexico and another 7% from Canada and China. This should cause US production costs to rise by 7% or $2,700 per vehicle (details below) from Q2 unless Trump removes tariffs.

• Tesla can’t hike its prices to cover for higher tariff costs: Tesla’s refreshed Model Y appears to be a flop worldwide, with no order backlogs and incentives already introduced in China from March 31st. While higher production costs in the US due to auto tariffs should be covered by price hikes, Tesla needs to cut prices to move the metal. This will cause further margin erosion.

• Cash burn may force Tesla to finance by year-end: Tesla issued $5.7 billion of debt last year, which is odd given its stated $36.6 billion of cash & equivalents. This implies that intra-quarter working capital needs draw down cash at a high rate, and Tesla might need to issue new shares to keep its balance sheet in shape. This would crash the share price as the overwhelming consensus is that Tesla is so cash-rich that it could acquire any of its rivals.