By Chris Isidore, CNN

(CNN) — Tesla’s troubles continued Wednesday as the company reported a double-digit drop in adjusted earnings for the second quarter, a fall that followed a record sales drop in the same period.

The company’s adjusted net income, the measure most closely followed on Wall Street, fell $419 million from one year ago to $1.4 billion. That’s a 23% drop – outpacing the sales decline of 13.5% over the same period.

The stricter reading for net income fell 16% to $1.2 billion.

Auto revenue – Tesla’s core business – fell 16% from April to June, while overall revenue fell 12%. Both dropped more than Wall Street expected, an indication Tesla couldn’t charge as much for cars as analysts had thought.

Tesla took in $500 less on each car sold in the quarter, too, with revenue per vehicle dropping to $42,231.

While sales of its best-selling Model Y and Model 3 fell 12% compared to a year ago, sales of its more expensive models, including the Cybertruck, plunged 52%.

Shares of Tesla (TSLA) were down 2% in after-hours trading following the report.

The sales weakness has been widely attributed both to backlash from CEO Elon Musk’s political activities, as well as increased competition for electric vehicles, especially from automakers in China.

Tesla sales have also been falling even in markets where EV sales are rising overall. The company is poised to lose its title of the world’s largest EV maker to BYD, a Chinese car company, which doesn’t even sell cars in the US.

Tesla’s dive over the last 18 months has been a stunning turn for a company that recorded only one quarterly year-over-year sales drop before 2024. That quarter was at the height of the Covid-19 pandemic, when showrooms and factories were ordered closed.

And the company still faces significant trouble ahead.

A $7,500 tax credit for US EV buyers will expire in October, which could force the company to further cut prices, and thereby profit margins, to support sales. US buyers account for nearly half of Tesla’s sales.

Perhaps the most serious financial problem facing Tesla is the elimination of the market for regulatory credit sales, which has fed $11 billion to the company’s bottom line since 2019. Gas-powered carmakers in the past bought emissions credits from Tesla, since its EVs came in below emissions limits, to avoid paying a fine. But the Republican tax and spending bill passed earlier this month removed financial penalties for automakers violating emissions rules.

Tesla would have lost money in the first three months of the year without its revenue from selling those credits. But its net income exceeded those credit sales in the most recent quarter.

Musk did not comment directly on the company’s sales and revenue dive during the company’s call with investors on Wednesday following the earnings report. Instead, he made only passing reference to the financial hurdles the company now faces.

“Yeah, we probably could have a few rough quarters,” he said. “And I’m not saying we will, but we could.”

Musk did not say if those potentially rough quarters would entail losses. He also predicted Tesla would only endure these hard times up until the middle of next year. After that, he said the company’s economics would be “compelling.”

Musk focused his remarks to investors Wednesday on ambitious goals for the company’s robotaxi service, saying it would be available to half the US population by end of the year, and made predictions about mass production of the company’s humanoid robot, Optimus, that is still in development.

“Autonomy is the story. It amplifies the value to stratospheric levels,” Musk said.

Musk has a history of making ambitious predictions for Tesla’s autonomous driving and robotaxi services, saying as far back as 2019 that the company was only a year away from offering a robotaxi service.

Tesla rolled out that long-promised robotaxi service in June. But the service was available in just a portion of Austin, Texas, to friends and fans of the company, and with an employee sitting beside the empty driver’s seat.

“While the service is limited in initial scope, we believe our approach to autonomy… allows us to continually improve safety, rapidly scale the network and improve profitability,” Tesla said in a statement Wednesday.

Still, it could be years before a robotaxi service actually makes money for the company. Meanwhile Waymo, the self-driving unit of Google parent Alphabet, is far ahead of Tesla in offering rides, with more than 250,000 paid rides a week in not just Austin but also San Francisco, Los Angeles and Phoenix.

This story has been updated with additional reporting and context.

The-CNN-Wire
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