In a dramatic turn of events that has Wall Street buzzing, Tesla reported a staggering 71% drop in first-quarter profits as CEO Elon Musk pledged to scale back his controversial role in the Trump administration’s Department of Government Efficiency (DOGE).
Meanwhile, financial markets rallied after President Trump declared he has “no intention” of firing Federal Reserve Chair Jerome Powell and signaled a potential trade deal with China.
Tesla’s Earnings Collapse Amid Political Backlash
Tesla’s quarterly earnings report revealed a troubling 71% plunge in profits compared to the same period last year, marking its worst quarterly performance since 2021. The electric vehicle maker has been battling headwinds on multiple fronts, including increased competition, potential tariff impacts, and perhaps most significantly, consumer backlash against Musk’s high-profile role in the Trump administration.
“The brand damage, some of that’s going to be permanent, but this was a big step for Musk,” Dan Ives, global head of technology research at Wedbush Securities, told ABC News. “I think it’s the beginning of the end of his time with the Trump administration. It’s an off-ramp.”
Tesla’s auto revenue slumped by 20% in the quarter, with deliveries falling 13% amid global protests targeting Tesla showrooms. The company’s stock has plummeted 41% since January 1, significantly impacting Musk’s personal wealth despite his remaining the world’s richest individual.
Musk Promises to Refocus on Tesla
In a move that sent Tesla shares higher in after-hours trading, Musk announced he would significantly reduce his involvement with DOGE starting in May.
“Now that the major work of establishing Department of Government Efficiency is done,” Musk said during Tesla’s earnings call, “I would be allocating far more of my time to Tesla.” He indicated his DOGE work would “drop significantly” to just “a day or two per week on government matters.”
However, Musk also suggested he might continue some level of involvement throughout Trump’s term, saying he would work with DOGE “as long as the President would like me to do so, and as long as it is useful,” according to TechCrunch.
The announcement comes as polling shows Americans have increasingly negative views of both DOGE and Musk himself. A New York Times review of polls found that while Americans support the concept of cutting government waste, they generally disapprove of DOGE’s implementation and Musk’s involvement, with as many as 60% of respondents expressing negative sentiment toward the initiative.
Markets Rally as Trump Backs Powell, Signals China Deal
In a separate development that boosted investor confidence, President Trump declared Tuesday he has “no intention of firing” Federal Reserve Chair Jerome Powell, defusing tensions that had roiled markets in recent days.
“The press runs away with things. I have no intention of firing him,” Trump told reporters at the White House, according to Al Jazeera. “I would like to see him be a little more active in terms of his idea to lower interest rates. This is the perfect time to lower interest rates. If he doesn’t, is it the end? No, it’s not.”
The statement marked a significant reversal from Trump’s previous rhetoric, where he had branded Powell a “major loser” and “Mr. Too Late” for not backing interest rate cuts.
US stock futures surged following Trump’s comments, with contracts linked to the S&P 500 and Nasdaq-100 rising more than 1.70% and 1.90%, respectively. The US dollar also strengthened by more than 1% against major currencies.
Further fueling the market rally, Trump indicated that his administration’s 145% tariffs on Chinese imports would “come down substantially” as part of potential trade negotiations. US Treasury Secretary Scott Bessent told an investors conference that a trade war with China was “unsustainable” and he expected the sides to de-escalate tensions.
“We’ll see what happens with China,” Trump said at a Cabinet meeting. “We would love to be able to work a deal. They’ve really taken advantage of our country for a long period of time. They’ve ripped us off beyond anybody.”
What’s Next for Tesla and the Markets?
Despite the profit plunge, Tesla reaffirmed its plans to launch a cheaper version of its best-selling Model Y SUV in the first half of this year. Musk also maintained his ambitious timeline for autonomous vehicles, claiming “millions of Teslas operating autonomously in the second half of the year” and suggesting that customers would be able to “go to sleep in our cars and wake up at your destination” in many US cities by the end of 2025.
Auto analysts remain skeptical of these timelines, with Sam Abuelsamid of Telemetry Insight noting that Tesla’s autonomous system “is not robust enough to operate unsupervised. It still makes far too many errors.”
For investors, the key question remains whether Musk’s promised step back from politics will be enough to reverse Tesla’s declining fortunes. While the stock initially responded positively to his announcement, the company faces significant challenges beyond the political backlash, including intensifying competition from rivals like China’s BYD and the potential impact of Trump’s tariff policies.
Meanwhile, financial markets appear cautiously optimistic about the administration’s softening stance on both the Federal Reserve and trade relations with China. However, as one analyst noted, “The current situation is not only chaotic, it’s crazy. Don’t forget that we have been here before with announcements and then we get some pauses, only for the originally announced tariff to be reintroduced again.”