While the global electric vehicle revolution has moved well past the company that kicked it off, America's EV leader is back in the news again after a tough second-quarter earnings call. Tesla, it's clear, has some clouds forming above its head.
That's not some shallow open-ended forecasting, but the outlook given by the guy up top. As he puts it, Tesla "could have a few rough quarters" ahead. But the company's contentious brand image may not help things in the meantime.
Welcome back to Critical Materials, your daily roundup for all things electric and tech in the automotive space. Also on deck: a look at the slow rollout of EV chargers under the federal National Electric Vehicle Infrastructure (NEVI) Program, and China's playbook for self-driving ethics plan goes live. Let's jump in.
30%: Tesla Is In For A Rough Spell. Musk Believes Autonomy Will Save It.
Tesla just posted its second-quarter financials, and while it technically beat Wall Street's expectations, the vibes on its earnings call were... well, let's just say tempered.
During the call, CEO Elon Musk told shareholders that its disappointing financials probably aren't over. In fact, it's more like they're just beginning— and the worst is yet to come. Tesla's biggest bet? Autonomy. Probably—and that's if it can actually pull it off in time.
Here's an excerpt from Musk during the call:
Well, we’re in this weird transition period where we’ll lose a lot of incentives in the U.S. There’s a lot of incentives actually in many other parts of world, but we’ll lose them in The US. But we’ll still at the relatively early stages of autonomy. On the other hand, autonomy is most advanced and most available from a regulatory standpoint in the US. So, does that mean we could have a few rough quarters?
Yeah. We probably could have a few rough quarters. I’m not saying we will, but we could. You know, Q4, Q1, maybe Q2.
But once you get to autonomy at scale in the second half of next year—certainly by the end of next year—I’d be surprised if Tesla’s economics are not very compelling.
Musk's response was to an analyst who asked if Tesla planned to push "meaningful price reductions" in the United States, given the impending loss of the EV tax credit at the end of the third quarter. Musk's response wasn't an outright "no," but its lack of an answer indicates that Tesla may be squeezing its cash cow dry, especially as it sits on $14 billion in unsold inventory.
That cash cow isn't just the car-to-consumer margin, either. It's also the hidden business-to-business incentive of selling regulatory credits to automakers that can't meet fuel-economy standards and spend billions of dollars to purchase credits from Tesla.
In the past decade, Tesla earned nearly $11 billion from the sale of regulatory credits, including $2.8 billion in 2024. In fact, Tesla has posted at least $1 billion from the sale of these credits annually since 2020. To give an idea of just how much of Tesla's income is attributed to the sale of these regulatory credits, Tesla's GAAP-adjusted profit in 2024 was $7.1 billion, meaning that the sale of regulatory credits made up a whopping 39.4% of its profitability for the year.
Soon, as made possible by the passing of the Big Beautiful Bill, that revenue source will be gone.
Here's a note on the topic from Reuters:
Analysts at William Blair calculate that about three-quarters of Tesla's credit revenue comes from CAFE standards. Within days of the new law, they slashed estimates for Tesla's 2025 credit revenue by nearly 40% to about $1.5 billion. They expect it to plummet to $595 million next year, before being wiped out in 2027.
That is a faster decline than seen by many on Wall Street. Tesla's revenue from credit sales will fall 21% this year to $2.17 billion and fall consistently in the coming years, according to 14 analysts polled by Visible Alpha this month.
All fingers point to Musk. The CEO spent nearly $300 billion helping U.S. President Donald Trump get elected, only to have the actions that Trump campaigned on come to fruition. Now, not only has a massive source of Tesla's revenue been eliminated with the single stroke of a pen, but consumer buying of EVs will almost certainly nosedive in the short term with the cancellation of the $7,500 EV tax credit. Plus, let's not forget the brand damage to Tesla that many have attributed to Musk.
Musk clearly believes that autonomy will save Tesla. This is apparent given that he believes Tesla will reach "autonomy at scale" by the second half of 2026, which is conveniently where he stopped listing Tesla's potential rough quarters.
However, Tesla has been promising autonomy and unsupervised Full Self-Driving for years using the same "coming soon" narrative. Could it be different this time? Sure. Will it? I guess we'll have to wait and see.
60%: The U.S. Built Less Than 400 EV Chargers Using The $7.5 Billion NEVI Program
Remember a few years ago when the U.S. government was giddy with excitement to allocate funding to new EV projects? One of those plans was a move to bolster EV infrastructure by allocating billions of dollars to the installation of new chargers. And, boy, did that not turn out as planned.
In case you were wondering how that $7.5 billion national charging infrastructure program was going, I have some pretty lackluster news: it's not. The Trump Administration paused funding for the remaining billions of dollars allocated to EV charging infrastructure under the Bipartisan Infrastructure Law back in February. And while we knew that was a slow burn to get moving in the first place, nobody realized just how few chargers were installed under the program—until now, that is.
According to a report from Reuters, out of the tens of thousands of chargers planned under the grant program, the U.S. managed to install only 384 chargers. To be clear, that's individual charging ports, not stations. 384 plugs. That's it.
Here's Reuters to tell the tale:
As of April 2025, 384 charging ports are operating at 68 stations in 16 states, GAO said, saying a joint office overseeing the program "has not defined performance goals with measurable targets and time frames for its activities."
In May, California and 15 other states sued the U.S. Transportation Department, saying the federal government was illegally withholding at least $3 billion awarded to states for building EV charging stations under a 2021 infrastructure law.
The Transportation Department under President Donald Trump in February suspended the EV charging program and rescinded approval of state plans pending a review. The GAO noted that Trump wants Congress to rescind $6 billion in unspent EV charging funding.
Democratic U.S. Senator Jeff Merkley of Oregon called the progress "pathetic" and a "vast administrative failure" just last year. However, it's worth noting that in June 2024, the U.S. only had seven charging stations deployed. And as of December 2023, the U.S. had only 166,000 public charging ports according to the U.S. Joint Office of Energy and Transportation.
Nearly eight months after Merkley's comments, the U.S. had deployed an additional nine charging stations, but that wasn't nearly enough to make the program a success. The number of EV chargers has grown to more than 222,000 according to the U.S. Department of Energy, which is around 21% since December 2023. But that's still a long shot from the 500,000 charger goal set to be hit by the top of the decade.
The U.S. has also slowed its EV charger deployment from 1,000 new EV chargers each week to an average of just over 660 per week since January 2023. Interestingly, charging providers say that the number of DC Fast Chargers installed will actually increase year-over-year; however, JOET data shows that the number of installations has fallen flat over the first half of the year so far. Unfortunately, it sure looks like none of those projects will be aided by federal funding unless something big changes.
90%: Tesla's Brand Image Is In The Gutter
There was a time in history when owning a Tesla made you cool. You were part of the future—progressive, even. It wasn't just about owning an EV; you were buying a lifestyle brand that made others perceive you as some sort of tech-loving, cold-brew-sipping rich guy who owns a car that can drive itself (spoiler: it can't).
Well, well, well—how the tides have turned. Tesla's image has turned toxic. Owners slap anti-Elon stickers on their rides, and the public's perception of the brand has gone from bad to worse. A new survey of more than 8,000 people places Tesla as the least trusted automaker in the entire country.
It's actually a bit worse than just that. In fact, Tesla is the only automaker with a net negative level of distrust across major manufacturers. Vietnamese brand Vinfast also had a negative net perception; however, 60% of survey respondents were either not familiar with Vinfast or had no opinion. Tesla's closest competitor was Lucid, which scored 38 points higher.
This wasn't just a fluke across one demographic segment, either. Tesla consistently scored negatively in brand perception across income brackets, geography and age range. 37% of respondents noted that their view of Tesla has become either "somewhat" or "much more" negative over the last six months.
Furthermore, four of Tesla's five vehicles ranked at the top of the "would not consider" list. The Cybertruck was the worst offender at 48% of buyers refusing to consider purchasing, followed by the Model X at 33%, then the Model 3 and Y tied at 32%. The Model S did not place in the top 14 published spots.
Tesla also scored lowest on perception of safety across all major automakers (Vinfast being the only non-major brand studied lower than Tesla), and second to lowest EV maker in the "Good For Families" section of the study, besting only Porsche and (once again) Vinfast.
Tesla did, however, top one list: the preferred charging network provider for new installations. And in a polarizing, yet predictable move, Tesla was simultaneously the least preferred charging network provider for the exact same survey question.
100%: Let's Do The Trolley Program For Self-Driving Cars
Did you see that China recently published a playbook on self-driving ethics? I always find these fascinating to read, even though many experts call for the same thing: respect life, minimize harm and advance the technology.
Of course, that always brings forth the classic trolley problem. The same thing applies to a self-driving car, except there's no lever to pull (maybe a steering wheel, though). MIT actually does a pretty interesting interactive version of this question called the Moral Machine (which you can try out here), but that's not what I really want to discuss today.
What is a topic of self-driving ethics that we haven't really settled on or discussed? Is it around advertising? Capability? Safety versus capitalism? Let me know your autonomy-related moral conundrum in the comments.
