Tesla's US Operations Should See Big Losses in 2025

A drop in large IRA credits for both Tesla's US car and energy businesses could fuel losses as sales drop in 2025.

• In light of Trump’s 25% tariffs on imported cars and parts from Q2, Tesla’s US operations—which already had thin profit margins last year—could go into losses this year.

• US car costs should rise by $2,000: Tesla’s car business in the US faces not only demand headwinds from anti-Musk sentiment, but also higher component costs. This should add around $2,000 in cost per vehicle. Passing this onto consumers might be tough given Tesla’s old lineup, yet bearing some of this burden would further erode Tesla’s already thin margins in the US (see details below).

• Tesla’s flourishing energy storage business could get squeezed: As of the end of 2023, Tesla was said to be using LFP battery materials from China for its energy storage products, which saw gross profits spike by 131% to $2.6 billion in 2024 (generating a 26% gross margin and making up 15% of Tesla’s total gross profits). If Tesla is still using China-made LFP batteries, their import duties should rise from 31% last year to 65% from Q2 after Trump’s additional 34% tariffs on Chinese battery cell imports.

• A slowdown in sales of both Tesla EVs and Megapacks could lead to lower IRA credits for both products, which came to $1.38 billion in 2024 ($625 million for Tesla’s EVs sold in the US and $756 million for Tesla’s Megapacks).

• If Tesla’s US car sales drop by 20% this year, so too will the $625 million of IRA credits it earned in 2024 (much of which came from the Cybertruck for which Tesla makes 100% of the battery packs in-house). While Megapack sales in the US are near peak capacity, margins could be squeezed by higher tariffs or see volumes drop if prices are hiked (Tesla’s Energy division saw 26.2% gross margins last year, but excluding IRA credits of $756 million, margins would’ve only been 18.7%).