Tesla says plans for its proposed $5 billion gigafactory in Mexico will be reassessed after the US presidential election amid expectations for higher tariffs if Donald Trump wins.

If elected, Trump is also anticipated to repeal or dampen the Inflation Reduction Act (IRA), which Tesla chief executive and co-founder Elon Musk says would harm competitors.

However, RBC Capital Markets analyst Tom Narayan says Tesla would be hurt as it “benefits from its domestic battery production on which the IRA offers generous subsidies to support”.

“The $7,500 credit from the IRA is an important driver for demand especially as we are in the midst of an EV slowdown in the US,” he adds.

Tesla is betting on full self driving (FSD) capabilities to drive future performance, though the much-anticipated launch of the autonomous Robotaxi vehicle has been delayed from August to October as the company makes “important changes”.

“We do worry about the company's ability to secure regulatory approvals and don't see a 2025 time line as realistic for a service offering … having more Teslas on the road increases the FSD contribution to profits,” Narayan adds.

In the three months to 30 June, Tesla’s revenue rose by 2% to $25.5 billion, driven by growth in the energy generation and storage arms, as well as strong sales for the Cybertruck, which Tesla says was the best-selling EV pickup in the US. The strong performance was offset by a cut in the S3XY model price tag and lower S3XY vehicle deliveries.

These factors, plus higher AI spending, contributed to a 45% slide in net income to $1.4 billion, Kallanish reports, with a 6.3% operating margin.

As announced earlier this month, the US carmaker produced 410,831 vehicles and delivered 443,956 units in the June quarter, a decline of 14% and 5%, respectively, compared to the same period last year. It also deployed a record 9.4 gigawatt-hours in energy storage products, up 20% from last year.

The Texas-headquartered company admits vehicle volume growth rate “may be notably lower” this year compared to 2023, as it works towards the launch of the new products. Revenue in the energy generation and storage arms is expected to outpace the automotive division.

It confirms that new vehicles, including more affordable models, are on track to begin production in the first half of 2025, on the same manufacturing lines as the current portfolio.

Tesla notes this approach will result in less cost reduction than previously expected but will be “more capex efficient”, as it can use its maximum capacity of 3 million vehicles. This will boost growth by 50% compared to 2023 production, before it invests in new manufacturing lines.