Elon Musk to take a break from DOGE and refocus on Tesla as profits plummet 71%

World’s richest man, Elon Musk, has said that he will sidestep the U.S. DOGE Service next month and focus on Tesla following the company’s staggering 71% drop in quarterly profits. Tesla’s net income fell to $409 million from $1.4 billion in the first quarter of 2024, according to the company’s earnings release.

The electric vehicle (EV) giant also saw a 9% decline in revenue, totalling $19.3 billion, well below Wall Street’s projections of $21.45 billion. The dismal financial performance, coupled with a 13% drop in vehicle deliveries to 336,681 units, marks Tesla’s worst quarter since 2022. CEO Elon Musk attributed the challenges to a combination of economic uncertainty, evolving trade policies, and intense competition, but analysts and investors point to Musk’s controversial political involvement as a significant driver of the company’s struggles.

Musk, who has served as a key adviser to President Donald Trump through the Department of Government Efficiency (DOGE), announced during Tesla’s earnings call that he would significantly scale back his involvement with DOGE starting in May.

“My time allocation to DOGE will drop significantly,” Musk said, noting he expects to dedicate only one or two days a week to the role for the remainder of Trump’s term.

This decision follows months of backlash against Musk’s high-profile efforts to slash federal spending and eliminate tens of thousands of government jobs, which have sparked protests, boycotts, and vandalism targeting Tesla facilities across the United States and Europe.

Tesla’s brand, once synonymous with eco-conscious innovation, has become a lightning rod for criticism due to Musk’s alignment with right-wing politics. Protesters have rallied outside Tesla showrooms, with incidents of vandalism reported in at least seven U.S. locations, including broken windows and damaged charging stations.

In London, demonstrators gathered to oppose Musk’s political activities, while sales in EV-friendly markets like Norway and Denmark dropped by over 12% this year. Patty Hoyt, a Northern California organiser, stated, “The Tesla Takedown grassroots pressure is beginning to hit Tesla where it hurts, the company’s bottom line.”

The company’s troubles are compounded by Trump’s aggressive tariff policies, which include a 25% levy on vehicles not assembled in the U.S. and up to 145% on Chinese imports. While the EV’s U.S.-assembled vehicles may shield it from some impacts, the tariffs increase production costs due to reliance on foreign suppliers for materials like automotive glass and battery cells from China and Mexico.

Musk, a vocal opponent of high tariffs, said he has advocated for lower tariffs in discussions with Trump but acknowledged, “It’s up to him, of course, to make his decision.” Tesla’s earnings report warned that “rapidly evolving trade policy” and “changing political sentiment” could further dampen demand.

Competition from Chinese automakers, particularly BYD, which surpassed Tesla in quarterly EV sales, adds to the pressure. BYD’s introduction of affordable EVs with rapid-charging technology has eroded Tesla’s market share, especially in China, the world’s largest EV market.

Tesla’s ageing lineup, including the Model 3 and Model Y, has also struggled to maintain appeal, despite a refreshed Model Y launched in February. The company reported production downtime during the quarter due to factory retooling, contributing to the delivery shortfall.

Musk’s political affiliation is hurting Tesla. 

Investor sentiment reflects the turmoil. Tesla’s stock, down 45% year-to-date, has lost over $585 billion in market value since January. After Musk’s announcement to reduce his DOGE role, shares rose 5.3% in after-hours trading, signalling optimism that his refocus on the company could stabilise the firm.

However, analysts remain cautious. Dan Ives of Wedbush Securities, a long-time Tesla supporter, lowered his stock price target from $550 to $315, describing the brand as a “political symbol globally” caught in a “brand crisis tornado”.

Gene Munster of Deepwater Asset Management called 2025 a “throwaway year” as the company invests in autonomous driving and AI, including the planned Cybercab, a fully autonomous vehicle without a steering wheel, slated for launch in the coming years.

Musk dismissed claims of brand damage, attributing sales declines to macroeconomic factors and consumer uncertainty. He defended his DOGE work, alleging that protesters were motivated by “waste and fraud”, and they stood to lose.

The EV company has reaffirmed plans to launch more affordable models by mid-2025 and a robotaxi service in Austin by next year.

The backlash has also affected its customer base. Trade-ins of Tesla vehicles surged to 1.4% of all vehicles traded at dealerships in March, up from 0.4% a year earlier, according to Edmunds. Some owners expressed “buyer’s remorse”, fearing their cars signal support for Musk’s political stance.

Jessica Caldwell of Edmunds noted that Musk’s reputation is driving brand disconnection, particularly among liberal and centrist buyers who fueled the company’s early success.

Despite the challenges, Tesla remains the world’s most valuable automaker by stock price and the top EV seller in the U.S. Musk expressed optimism, stating, “The future for Tesla is better than ever.”

However, with mounting competition, trade uncertainties, and a tarnished brand, the company faces a critical juncture. Investors and analysts agree that Musk’s ability to refocus on innovation and rebuild consumer trust will determine whether the EV giant can reclaim its dominance in the market.