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Badly in need of a spark, Tesla (TSLA) is charging higher after delivering 1Q25 results that were predictably weak amid softening global demand for EVs, market share losses in China, and ongoing ASP/margin compression. With the market discounting Q1 as a "trough quarter", as reflected by the stock's 40% plunge since TSLA's Q4 earnings report in late January, the focus has turned to 2H25 and beyond. On that account, Elon Musk, who stated that he expects to limit his government work to 1-2 days per week starting next month, made the case that stronger growth is on the horizon.

• After TSLA reported that Q1 deliveries dove by 13% yr/yr to 336,681 vehicles on April 2, it was a foregone conclusion that this would be another rough quarter. It was indeed just that as automotive revenue fell by 20% yr/yr to $13.97 mln, badly missing expectations, driven by the drop in deliveries and a significant decline in ASPs that was likely in the high single-digit to low double-digit percentage range.
• TSLA's stale vehicle lineup, which currently lacks more affordable models, has placed the company between a rock and a hard place because it can't lean on new innovation for a competitive edge. Either the company lowers prices to protect market share, leading to steep declines in margins and profits, or it maintains prices in order to protect margins, leading to more severe market share losses. TSLA has opted for the former option and the impact continues to be felt on the bottom-line as EPS declined by 40% yr/yr to $0.27 while gross margin contracted by 110-bps yr/yr to 16.3%.
• The one bright spot continues to be the Energy Generation and Storage business, which generated revenue growth of 67% to $2.73 bln, driven by a 154% surge in energy storage deployments. The utility-scale Megapack business is experiencing robust demand, especially in the U.S., which remains TSLA's largest market for energy storage revenue.
• What's really supporting the stock today, though, is Musk's positive commentary on autonomous driving, new vehicle launches, and the Optimus humanoid robots. On the first point, Musk reiterated that he expects TSLA to be selling fully autonomous rides in Austin, Texas this June, with autonomous rides moving the financial needle in a substantial way by the middle of 2026. While the Cybercab business is highly speculative and subject to execution and regulatory risks, the revenue opportunity is significant with some internal estimates suggesting a low single-digit billions opportunity initially, eventually reaching $20-$30 bln or more. 
• Production of more affordable versions of Model Y and Model 3 has been pushed back, creating more disappointment for TSLA investors, but Musk reiterated his commitment to launching new vehicles. For the low-cost Model Y, production in the U.S. is now slated to begin between 3Q25 and early 2026, while plans for the stripped-down Model 3 version remain fluid, but production could still begin in 1H25.

TSLA's weak 1Q25 results reflect a challenging environment marked by demand headwinds, market share losses, and margin compression. However, the company’s long-term innovation pipeline, strong balance sheet, and Musk’s optimistic outlook for 2H25 and beyond have driven a sharp rebound in the stock, as investors look beyond the current trough to future growth catalysts.