Is Tesla’s slump an opportunity for Australian investors?

_{This article was developed in collaboration between IG's editorial team and AI technology}

Australian markets rally

The Australia 200 opened significantly higher on Wednesday, gaining 1.8% to 7954 points, following strong overnight gains on Wall Street and positive US futures sentiment.

Around Asia-Pacific, Tokyo's Japan 225 surged 2.4%, surpassing 35,000 points for the first time since early April.

Global market snapshot

• Australia 200: +1.8% to 7954 points
• Australian dollar: +0.3% to 63.81 US cents
• US 500: +2.5% to 5287 points
• US Tech 100: +2.7% to 16,300 points
• FTSE 100: +0.6% to 8328 points
• EuroStoxx 600: +0.3% to 507 points
• Spot gold: -1.2% to US$3342/ounce
• Crude oil: +0.7% to US$67.92/barrel
• Iron ore: +0.2% to US$99.95/tonne
• Bitcoin: +2.8% to US$93,726

Wall Street rebounds

US equities rebounded strongly on Tuesday, buoyed by easing trade tariff concerns and supportive commentary from US Treasury Secretary Scott Bessent, who anticipated a de-escalation in tariff tensions. All 11 S&P 500 sectors rose, led by financials.

Tesla earnings analysis: dissecting the 71% profit plunge

Tesla reported a dramatic 71% plunge in Q1 profit, with net income falling sharply to US$409 million amid weak global sales and volatile stock performance.

Key financial results

• Revenue: $19.34 billion vs $21.04 billion expected (8.1% miss)
• Year-on-year revenue change: -9.2%
• EPS: $0.12 vs $0.29 expected ($0.17 miss)
• Vehicles delivered: 336,681 vs 366,248 expected (8.1% miss)
• Operating margin: 2.1%, down from 5.5% in same quarter last year
• Gross margin: 16.3%, down from 17.4% in same quarter last year
• Free cash flow margin: 3.4%, up from -11.9% in same quarter last year

Despite missing expectations, Tesla shares rose 4.6% in regular trading and added another 5.4% in after-hours trading, suggesting investors found positive signals within the results and company outlook.

Tesla's bright spot

While Tesla's automotive segment struggled, analysts noted the company's energy business shows promise. The division includes the Megapack, a large-scale battery system that can power 100 to 150 homes for 24 hours and sells for over $1 million each.

According to market analysts, Megapacks have higher margins than EVs, with a single Megapack sale generating as much operating profit as around 100 Tesla automobiles. This may present opportunities for Australian investors interested in the energy storage sector.

Trade policy implications for Australian investors

Tesla highlighted in its earnings report that "uncertainty in the automotive and energy markets continues to increase as rapidly evolving trade policy adversely impacts the global supply chain and cost structure of Tesla and our peers."

The company cautioned about near-term impacts from the "current tariff landscape" and noted that "changing political sentiment" could impact demand for its products.

The EV competitive landscape

Tesla's Q1 results spotlight the intensifying global competition, particularly from Chinese rival BYD (BYD). With Tesla’s deliveries down 13%, Australian tech stocks such as Xero and Appen could see increased investor attention amid shifting market dynamics.

Increasing competition from China’s EV manufacturers, particularly BYD, poses further challenges for Tesla. President Trump’s recent 25% auto sector tariffs exacerbate these challenges, although Tesla claims a relatively strong domestic US supply chain.

Musk’s controversial political activities, particularly his closeness to President Trump and his embrace of right-wing politicians in Europe, have significantly damaged Tesla’s brand image globally. This alignment has sparked widespread protests and increasing acts of vandalism at Tesla showrooms both in the US and abroad, underscoring the growing public backlash against the company's perceived political affiliations.

Investment takeaways for Australian investors

• Tech sector outlook: Australian tech companies could benefit from the global tech rebound despite Tesla's challenges
• Energy storage opportunities: Tesla's energy business growth could present investment opportunities in battery storage sectors
• Trade policy vigilance: US-China tensions require monitoring for commodity-linked Australian equities
• Market sentiment shift: Wall Street’s rally without fresh tariff threats suggests market resilience to political rhetoric
• EV and battery materials: Australian lithium and rare earth companies like Mineral Resources, Allkem, and Pilbara Minerals warrant consideration in light of Tesla’s evolving competitive landscape

Australian investors should watch for Tesla's revised 2025 guidance in its second-quarter financial update, as the company has removed its long-term growth forecast due to market uncertainties. Additionally, Tesla's plans for an affordable EV and the Robotaxi rollout scheduled for June in Austin remain key catalysts to monitor for the stock's future performance.