The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Jonathan Guilford

NEW YORK, April 22 (Reuters Breakingviews) - It’s easy to forget how unassailable Tesla’s TSLA.O position once seemed. Boss Elon Musk upended an entire industry, building an automaker more valuable than its biggest rivals combined by making electric vehicles sexy. The latest numbers are far from appealing, however, and raise concerns about how the company will correct course.

For a stock trading at 82 times expected earnings over the next 12 months, per LSEG, actual financial results might seem superfluous. Tesla’s blockbuster energy storage business keeps improving and it has navigated tricky setbacks before. And yet the wreckage unveiled on Tuesday is too ghastly to ignore.

Deliveries during the first three months of 2025 tumbled 13% from a year earlier while Cybertruck sales fell 61% from their peak after just five quarters on the market, according to Cox Automotive data. Revenue in the core automotive business slumped 20%. After adjusting for sales of regulatory credits, the division’s 12.5% gross margin now sits at less than half the 30% generated three years ago. Slashing capital expenditures by half is a bad sign from a company with such ambitious and expensive plans.

As Musk is fond of telling workers whose jobs he’s trying to cut, Tesla is at a fork in the road. He has slow-rolled development of a truly affordable, $25,000 car, instead favoring a lesser version of the best-selling Model Y, which may now be delayed, according to Reuters. To sustain gross profitability, the mooted 20% savings on today’s costs would yield a price tag of $32,000. Tesla’s 2.1% operating margin last quarter, however, is half the level at which Morgan Stanley analysts estimate the automotive business breaks even "at best."

In lieu of cars for the masses, Musk is chasing true self-driving sophisticated enough to ditch a steering wheel. It’s a bold, albeit reasonable, idea. Manufacturing cars is a humdrum business, but turning them into software-powered appliances would shake things up in much the same way Apple did with the iPhone.

Achieving such dominance requires a sweet spot of features, affordability and a knack for avoiding diversions or polarizing controversy. Musk has shown no capability of such restraint. In a few short months of advising President Donald Trump, he managed to anger and ostracize existing and potential Tesla customers, and the stock price is down 40% this year. Musk also ponders space travel, social media, artificial intelligence, tunnel construction and brain implants. On Tuesday's earnings call, he promised that he would refocus on Tesla but without dropping his other commitments entirely. Changing lanes when driving fast is hard enough without an indignant and distracted driver.

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CONTEXT NEWS

Electric-car maker Tesla said on April 22 that it generated $19 billion of revenue in the first quarter, a 9% decline from a year earlier and 8% less than analysts were expecting, according to Visible Alpha data.

Revenue from Tesla’s automotive business fell nearly 20% year-over-year to about $14 billion. Operating profit declined 66% to $399 million.

(Editing by Jeffrey Goldfarb and Pranav Kiran)

((For previous columns by the author, Reuters customers can click on GUILFORD/ Jonathan.Guilford@thomsonreuters.com))