For the first time in a long time, it seems like Tesla might actually be in some trouble.
The company has faced questions in the past—whether about its valuation, upcoming product launches, or the machinations of its mercurial CEO—but this time, it feels different.
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Tesla is expected to report its quarterly earnings after the closing bell on Tuesday, and investors aren’t expecting much after the company reported a 13% year-over-year decline in first-quarter sales, its largest decline in company history.
Barclays analyst Dan Levy said he expects Tesla to report tough gross margins due to volume decline and production inefficiencies, and he expects production volume to decline this year.
Related: More surprising China news hits Tesla stock
Analysts polled by Yahoo Finance expect the company to report flat first-quarter earnings of 42 cents per share on revenue of $21.41 billion.
On Monday, investors piled out of the stock before the company’s earnings release.
Tesla hasn’t been selling as many cars as it used to recently.
Tesla shares drop ahead of earnings
At last check Monday afternoon, Tesla shares dropped more than 7% as investors prepared for the worst on Tuesday.
At the start of April, Tesla announced that it delivered 336,691 new vehicles in the first quarter, a 32% decline from the record 495,570 it reported in the previous quarter, missing analysts’ downwardly revised estimates of 373,000.
This has cast a pall over Tesla’s quarter, leading normally bullish analysts to reevaluate their thinking on the company.
Wedbush analyst Dan Ives is known for being a Tesla Uber-bull, but even he sent a word of caution to investors this weekend, saying “Musk needs to leave the government, take a major step back on DOGE, and get back to being CEO of Tesla full-time.”
Since the start of the year, Tesla shares have declined nearly 45% year to date as Musk has become more involved with his job within the President Donald Trump administration.
Related: Analyst flags major Tesla problems ahead unless Elon Musk takes bold action
The political fallout has undeniably negatively affected Musk’s most consumer-facing business, Tesla.
Tesla shares were trading in the $225 range Monday afternoon, about the same level they were at 10 months ago.
Tariffs come at a bad time for Tesla
In addition to all the domestic issues with Tesla, the international trade war Musk’s boss thrust the world into isn’t helping matters.
Trump recently took the unprecedented measure of placing a 125% tariff on all Chinese imports, which he increased to 145% after saying that China was wrong for retaliating against his threats.
While most of Tesla’s physical parts are USMCA products, some of the components for its software are not.
Tesla’s U.S. production plans for the Cybercab and its oft-rumored semi-electric cargo truck are being disrupted by auto tariffs. According to reports, the company was initially prepared to absorb 34% tariffs levied against China, but the extra costs became untenable as it scaled production.
Since China tariffs currently sit at 145%, the company can no longer source the parts from China that it needs to build the vehicles.
Tesla was supposed to start receiving component shipments in the coming months, and the company has reportedly been sourcing more materials from North America in anticipation of the tariffs.
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