Tesla Q1 profit falls by more than half, but stock jumps amid production of cheaper vehicles

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The Austin, Texas, company said it made $1.13 billion from January through March compared with $2.51 billion in the same period a year ago. Photo courtesy of Tesla

Tesla’s first-quarter net income plummeted 55 percent, but its stock price surged in after-hours trading Tuesday as the company said it would accelerate production of new, more affordable vehicles.

The Austin, Texas, company said it made $1.13 billion from January through March compared with $2.51 billion in the same period a year ago.

Investors and analysts were looking for some sign that Tesla will take steps to stem its stock's slide this year and grow sales. The company did that in a letter to investors Tuesday, saying that production of smaller, more affordable models will start ahead of previous guidance.

The smaller models, which apparently include the Model 2 small car that is expected to cost around $25,000, will use new generation vehicle underpinnings and some features of current models. The company said it would be built on the same manufacturing lines as its current products.

On a conference call with analysts, CEO Elon Musk said he expects production to start in the second half of next year “if not late this year.”

New factories or massive new production lines won't be needed for the new vehicles, Musk said.

“This update may result in achieving less cost reduction than previously expected but enables us to prudently grow our vehicle volumes in a more capex efficient manner during uncertain times,” the investor letter said.

But Musk gave few specifics on just what the new vehicles will be and whether they would be variants of current models. “I think we’ve said all we will on that front,” he told an analyst.

He did say that he expects Tesla to sell more vehicles this year than last year's 1.8 million.

The company also appears to be counting on a vehicle built to be a fully autonomous robotaxi as the catalyst for future earnings growth. Musk has said the robotaxi will be unveiled on Aug. 8.

Shares of Tesla rose 11 percent in trading after Tuesday’s closing bell, but they are down more than 40 percent this year. The S&P 500 index is up about 5 percent for the year.

Morningstar analyst Seth Goldstein said the company gave guidance about its future that was clearer than in the past, allaying investor concerns about production of the Model 2 and future growth. “I think for now we're likely to see the stock stabilize," he said. “I think Tesla provided an outlook today that can make investors feel more assured that management is righting the ship.”

But if sales fall again in the second quarter, the guidance will go out the window and concerns will return, he said.

Tesla reported that first-quarter revenue was $21.3 billion, down 9 percent from last year as worldwide sales dropped nearly 9 percent due to increased competition and slowing demand for electric vehicles.

Excluding one-time items such as stock-based compensation, Tesla made 45 cents per share, falling short of analyst estimates of 49 cents, according to FactSet.

The company’s gross profit margin, the percentage of revenue it gets to keep after expenses, fell once again to 17.4 percent. A year ago it was 19.3 percent, and it peaked at 29.1 percent in the first quarter of 2022.

Over the weekend, Tesla lopped $2,000 off the price of the Models Y, S and X in the U.S. and reportedly made cuts in other countries including China as global electric vehicle sales growth slowed. It also slashed the cost of “Full Self Driving” by one third to $8,000.

Tesla also announced last week that it would cut 10 percent of its 140,000 employees, and Chief Financial Officer Vaibhav Taneja said Tuesday the cuts will be across the board. Growth companies build up duplication that needs to be pruned like a tree to continue growing, he said.

Musk has been touting the robotaxi as a growth catalyst for Tesla since the hardware for it went on sale late in 2015.

In 2019, Musk promised a fleet of autonomous robotaxis by 2020 that would bring income to Tesla owners and make their car values appreciate. Instead, they've declined with price cuts, as the autonomous robotaxis have been delayed year after year while being tested by owners as the company gathers road data for its computers.

Neither Musk nor other Tesla executives on Tuesday's call would specify when they expect Tesla vehicles to drive themselves as well as humans do. Instead, Musk touted the latest version of Tesla’s autonomous driving software — which the company misleadingly brands as “Full Self Driving” despite the fact that it still requires human supervision — and said that “it’s only a matter of time before we exceed the reliability of humans, and not much time at that.”

It didn’t take the Tesla CEO long to begin expounding on the possibility of turning on self-driving capabilities for millions of Tesla vehicles at once, although again without estimating when that might actually occur. He went on to insist that “if somebody doesn’t believe that Tesla is going to solve autonomy, I think they should not be an investor in the company.”

Early last year the National Highway Traffic Safety Administration made Tesla recall its “Full Self-Driving” system because it can misbehave around intersections and doesn’t always follow speed limits. Tesla's less-sophisticated Autopilot system also was recalled to bolster its driver monitoring system.

Some experts don't think any system that relies solely on cameras like Tesla's can ever reach full autonomy.

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Solar power and storage help save Texans millions on electric bills, CEO tells Senate

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Solar power and battery storage are saving Texans hundreds of millions of dollars on their electric bills, the president and CEO of the Solar Energy Industries Association recently told a congressional committee.

Abigail Ross Hopper, the association’s president and CEO, said in testimony given to the U.S. Senate Environment and Public Works Committee that states like Texas that are adding significant capacity for solar power and battery storage are enjoying lower, more stable prices for electricity.

“Unsubsidized solar is now the cheapest source of electricity in history in much of the country,” Hopper said. “With no fuel costs, solar provides a hedge against natural gas price volatility that continues to cause electricity price spikes.”

“The only way to put downward pressure on prices is by bringing more power online, not less,” she added.

To illustrate the value of solar power and battery storage, Hopper compared two hot summer days in Texas—one in July 2022 and the other in July 2025.

Hopper explained that the Electric Reliability Council of Texas (ERCOT) had begun installing solar on its grid in 2022 but had very little battery storage. ERCOT manages 90 percent of the state’s electrical load.

When ERCOT grid conditions buckled under high demand on the highlighted day in 2022, the price of electricity spiked to nearly $1,500 per megawatt-hour, Hopper said.

“Three years later, the amount of solar had increased substantially and was complemented by energy storage,” she said.

On the specified day in 2025, under even greater demand than three years earlier, sizable amounts of solar power, battery storage and wind power kept ERCOT’s midday price of electricity low and stable—around $50 per megawatt-hour. That dollar amount represented a nearly 100 percent decrease compared with the highlighted day in 2022.

Solar and wind supplied nearly 40 percent of Texas’ power during the first nine months of 2025, according to the U.S. Energy Information Administration (EIA).

Despite the state’s expansion of solar power and battery storage capacity, residential electricity prices in ERCOT’s territory rose 30 percent from 2020 to 2025 and are expected to climb another 29 percent from 2025 to 2030, according to a forecast from the Texas Energy Poverty Research Institute.

The increase in electric bills is tied to factors such as:

Higher natural gas prices
Greater demand from AI data centers and cryptomining facilities
Extreme weather
Population growth
Development of new transmission and distribution lines

The strain on ERCOT’s grid is only getting worse. An EIA forecast predicts demand for ERCOT electricity will jump 9.6 percent in 2026, and ERCOT expects a 50 percent jump in demand by 2029.

Spring-based private equity firm acquires West Texas wind farm

power deal

Spring-based private equity firm Arroyo Investors has teamed up with ONCEnergy, a Portland, Oregon-based developer of clean energy projects, to buy a 60-megawatt wind farm southeast of Amarillo.

Skyline Renewables, which acquired the site, known as the Whirlwind Energy Center, in 2018, was the seller. The purchase price wasn’t disclosed.

Whirlwind Energy Center, located in Floyd County, West Texas, comprises 26 utility-scale wind turbines. The wind farm, built in 2007, supplies power to Austin Energy.

“The acquisition reflects our focus on value-driven investments with strong counterparties, a solid operating track record, and clear relevance to markets with growing capacity needs,” Brandon Wax, a partner at Arroyo, said in a press release. “Partnering with ONCEnergy allows us to leverage deep operational expertise while expanding our investment footprint in the market.”

Arroyo focuses on energy infrastructure investments in the Americas. Its portfolio includes Spring-based Seaside LNG, which produces liquefied natural gas and LNG transportation services.

Last year, Arroyo closed an investment fund with more than $1 billion in total equity commitments.

Since its launch in 2003, Arroyo has “remained committed to investing in high-quality assets, creating value and positioning assets for exit within our expected hold period,” founding partner Chuck Jordan said in 2022.

$524M Texas Hill Country solar project powered by Hyundai kicks off

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Corporate partners—including Hyundai Engineering & Construction, which maintains a Houston office—kicked off a $524 million solar power project in the Texas Hill Country on Jan. 27.

The 350-megawatt, utility-scale Lucy Solar Project is scheduled to go online in mid-2027 and represents one of the largest South Korean-led investments in U.S. renewable energy.

The solar farm, located on nearly 2,900 acres of ranchland in Concho County, will generate 926 gigawatt-hours of solar power each year. That’s enough solar power to supply electricity to roughly 65,000 homes in Texas.

Power to be produced by the hundreds of thousands of the project’s solar panels has already been sold through long-term deals to buyers such as Starbucks, Workday and Plano-based Toyota Motor North America.

The project is Hyundai Engineering & Construction’s largest solar power initiative outside Asia.

“The project is significant because it’s the first time Hyundai E&C has moved beyond its traditional focus on overseas government contracts to solidify its position in the global project financing market,” the company, which is supplying solar modules for the project, says on its website.

Aside from Hyundai Engineering & Construction, a subsidiary of automaker Hyundai, Korean and U.S. partners in the solar project include Korea Midland Power, the Korea Overseas Infrastructure & Urban Development Corp., solar panel manufacturer Topsun, investment firm EIP Asset Management, Primoris Renewable Energy and High Road Energy Marketing.

Primoris Renewable Energy is an Aurora, Colorado-based subsidiary of Dallas-based Primoris Services Corp. Another subsidiary, Primoris Energy Services, is based in Houston.

High Road is based in the Austin suburb of West Lake Hills.

“The Lucy Solar Project shows how international collaboration can deliver local economic development and clean power for Texas communities and businesses,” says a press release from the project’s partners.

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