Tesla profits drop as automaker starts to move away from electric cars

29 January 2026

The year 2025 was supposed to be a big one for Tesla. Instead, the numbers tell a completely different story. The world's most famous maker of electric cars released its financial results yesterday, and the data show a company facing stiff challenges. For the first time in its history, Tesla made less money in a year than it did the year before. While CEO Elon Musk talks about a future filled with robots and self-driving taxis, the business of selling cars took a major hit.

The financial report paints a grim picture for the company. Tesla's total profit for 2025 was £2.77 billion. That is a lot of money, whichever way you look at it, but it is actually 46 percent less than what the company made in 2024. The profit margin, which is the percentage of money the company keeps after paying expenses, fell to just 4.9 percent. In 2022, that number sat at 23.8 percent.

One of the most interesting parts of the financial report is how Tesla made its money. A large chunk of its profit did not come from selling EVs to people. Instead, it came from selling "regulatory credits" to other car companies that need help meeting pollution rules. These credits brought in £1 billion.

That means 52 percent of Tesla's entire profit for the year came from these credits, not from selling vehicles. If Tesla did not have those credits, the financial results would look much worse. And the problem the company is facing? Those credits are gone; they won't be part of Tesla's business model this year since they were cancelled by the current administration.

Tesla sold 1,636,129 cars in 2025. This is roughly 9 percent less than the year before. The end of the year was particularly hard. In the fourth quarter alone, sales dropped by 16 percent compared to the same time in 2024. Revenue from selling cars fell by 10 percent to £50.59 billion for the year.

The automaker faced problems from many directions. There is more competition now from other companies making electric cars. Also, the government changed the rules. The "One Big Beautiful Bill Act," passed on July 4, ended the £5,500 tax credit that used to help people buy Teslas, making the cars more expensive for normal buyers.

In a shocking surprise to many fans, Musk announced that Tesla will stop making the Model S and the Model X. Musk says the factory space in Fremont, California, where these cars are made, is needed for something else. He plans to use that space to build robots. The goal is to make up to one million robots every year, but we all know how those plans go. Will Tesla eventually shift to robotics and AI? Yes, absolutely, but it won't be an easy ride, and it'll take a little bit longer than Musk promises.

It was not all bad news. Tesla is doing very well in areas outside of selling cars. The energy storage business, which sells big batteries for homes and power grids, grew by 27%. It brought in £9.24 billion. The services division also grew by 19%, earning £9.10. These two parts of the company are becoming very important as car sales slow down.

Elon Musk tried to keep investors happy by looking forward. He spoke about a future with "amazing medical care" and "high universal income." He claims that 2026 will see the release of the Cybercab, a robot taxi with two seats. He also mentioned the Tesla Semi truck and a new version of the Roadster sports car, which might be shown in April.

All the glossy predictions aside, shareholders might be worried about where the money is going. Tesla invested £1 billion into xAI, an artificial intelligence company owned by Musk. Unexpectedly for many - or maybe expectedly - the company and its main product, Grok, have quickly become known for excelling at deepfake technology.

On a side note, Tesla is changing how it charges for its self-driving features. The "Full Self-Driving" system will now be a subscription service costing £72 per month. The company is also removing the standard Autopilot feature. Musk insists that safety is the top priority, saying the company is "paranoid about safety."

Despite the bad numbers, Tesla shareholders voted for a pay package for Musk that could make him a trillionaire if the company's value hits £1 trillion. But for now, the company has to figure out how to either sell more electric cars in a world that seems to be buying fewer of them, or shift quickly to other revenue streams to replace the falling sales.

The reality is that Tesla has slowly started shifting away from selling EVs to the public. It won't happen overnight, but with the Model S and Model X now officially gone, we can see the beginning of the end. The Cybercab will eventually launch, and it will replace the need for ownership for many people. The Semi will start selling in big numbers, and with the energy storage business booming, Tesla won't need to worry about selling cars to the public.

The Roadster, however late, will be the new halo model, which will sell in small numbers, but it was never meant to be a mass-produced EV. Tesla's stake in xAI will alone bring enough profit once the new AI pioneer goes public. And yes, whether we like it or not, the robots are coming, and Tesla will make sure they are literally everywhere. Shareholders rejoice. Workers? Workers have to hope that Musk's promises about universal income do come true.

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