Elon Musk is returning to Tesla and stepping away from DOGE, but is it too late with shares down 50%?

Overnight, the biggest news on Wall Street were reports that Elon Musk is returning to Tesla and stepping away from DOGE (The Department of Government Efficiency).

Tesla shares rallied over 4% over this news, but shares have halved since December 2024…and it is not just because Tesla has a lot of Trump-haters as customers.

Elon Musk is returning to Tesla amidst a big profit drop

The news came as the company, now based in the Texan capital of Austin, released results for the first quarter of 2025. The company boasted that it produced over 362,000 vehicles and delivered 336,000 of them.

The problem is that the company suffered its worst quarter by revenue and sales in years – since Q2 2022. Its revenue was US$19.3bn and its EPS was $0.27 per share, with the latter representing its least profitable since Q1 2021. All aforementioned figures were well below consensus estimates (i.e. over 10%). And Musk is now returning to the company.

How Tesla got here

Tesla was founded and grown by Elon Musk, worth US$361bn according to Forbes Magazine’s latest estimates. Even having lost US$100bn this year, he is easily the richest person on the planet. Over the last few years he has become increasingly involved in politics and become close to US President Donald Trump. Having been renowned as a liberal icon because his company led the pivot to EVs in the 2010s, he has made a sharp U-turn from that perception.

Musk is highly credited with Trump’s win for many reasons including how he contributed over a quarter of a billion dollars to his campaign and how he bought Twitter, renaming it X, and was less hostile towards Trump sympathisers on the platform. Musk’s reward was being appointed to lead the Department of Government Efficiency (DOGE), a department tasked with cutting government waste.

Dependant on who you believe DOGE is either just a stunt that isn’t so much about cutting spending as it is intimidating the public service (most notoriously through emailing them all and asking them what they achieved in the last week) or an entity that is cutting the public service at the public’s expense.

Either way, this endeavour was taking a lot of Musk’s time. At the earnings call, Musk said his ‘time allocation to DOGE’ would ‘drop significantly’ starting next month. He said he would work only one to two days per week on government matters and,’ as long as the President would like me to do and as long as it’s useful’. He did claim that,’ Getting the government house in order is almost done’.

DOGE is the least of Tesla’s worries

It is easy to just say that people aren’t buying Teslas, or surrendering them if they are owners, just because they don’t like Musk and Trump. There is an element of truth to that, but it is not the entire story.

As we’ve touched on across 2025, there is a lot of competition in the EV space, both from traditional companies catching up and from newer companies such as BYD. Last month, BYD unveiled a vehicle that can charge for 400km of range in just 5 minutes – or 1km a second. The reason this is crucial is because this is just as fast as a petrol-tank car refills. Tesla’s fastest-charging cars take 15 minutes to add enough power to drive 172 miles. BYD has officially stolen the crown of the world’s largest EV producer and has many more low-cost options.

And there is concern about the impact of Trump’s tariffs on global sales, particularly in China. In fact, there is even concern over US sales because components are made in China. Even though Musk claimed his company was least affected by tariffs, he did say that they were ‘still tough on a company where margins are low’.

Finally, there is also the question of the company’s future plans of integrating more AI and for self-driving cars. Tesla has promised the latter for years but never met any publicly set deadlines. So even though he says you’ll be able to be in it in some US cities ‘by the end of the year’, who seriously believes that (at least without seeing it)? Tesla couldn’t even give guidance for the coming quarter for its existing business.

Conclusion

JP Morgan analyst Ryan Brinkman declared last month that,’ We struggle to think of anything analogous in the history of the automotive industry, in which a brand has lost so much value so quickly’. For our part, neither can we.

Elon Musk’s return is an acknowledgement on his part that there are problems that he should take on himself. Whether or not he can solve them is anyone’s guess, although a lot of damage has been done to the company and some damage may be irreversible.

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