Tesla makes money in two main ways. First, it designs and sells electric vehicles — the Model 3, Model Y, Model S, Model X, and Cybertruck — directly to customers through its own website and stores, cutting out car dealerships entirely. Second, it sells energy products: Powerwall batteries for homes and Megapack batteries for power grids. On top of these physical products, Tesla charges for software features like Full Self-Driving (FSD), collects fees when drivers use its Supercharger network, sells car insurance, and earns regulatory credits by selling clean-air certificates to other automakers who need them to comply with emissions rules. In June 2025, it also launched a Robotaxi service — a driverless ride-hailing platform currently running on Model Y vehicles, with a purpose-built autonomous car called Cybercab planned to follow. The diagram below traces where the money goes.

Five years of financial data tell a story of rapid growth followed by a sharp slowdown. Revenue more than doubled from $53.8 billion in 2021 to $96.8 billion in 2023. Then it stalled. In 2024, revenue edged up just $900 million to $97.7 billion. In 2025, it fell back to $94.8 billion — the first full-year decline in recent memory. That drop was driven mainly by falling car sales, which slid from $78.5 billion in 2023 to $65.8 billion in 2025.

The profit picture is equally mixed. Gross margin — the share of each dollar of revenue left after paying to make the product — was around 25% in 2021 and 2022. It fell sharply to around 18% in 2023 and has stayed near that lower level ever since. Tesla cut vehicle prices aggressively to defend its market share as more electric vehicle competitors arrived. That kept cars moving off the lot, but squeezed the profit on each one. Meanwhile, the energy storage business has quietly improved, with its gross margin climbing from 18.9% in 2023 to 29.8% in 2025 as Megapack deployments scaled up.

One positive trend has held steady throughout: cash generation. Tesla produced $14.7 billion in operating cash flow in 2025, nearly matching its 2024 figure of $14.9 billion, and well above the $11.5 billion it generated in 2021. The company also carries more cash than debt — its net cash position was $16.5 billion at the end of 2025. That financial cushion matters because Tesla plans to spend more than $20 billion on capital expenditures in 2026, funding new factories, AI computing infrastructure, and the Robotaxi buildout.

Free cash flow — what is left after building factories and equipment — has been more volatile. It reached $7.6 billion in 2022, fell to $4.4 billion in 2023, and dipped further to $3.6 billion in 2024 as capital spending surged. In 2025, it recovered to $6.2 billion as Tesla pulled back on spending somewhat. But with capital expenditures set to exceed $20 billion in 2026, free cash flow will almost certainly come under pressure again.

Tesla faces several well-documented threats. Its battery supply chain runs through a small number of suppliers — notably Panasonic and CATL — and depends on raw materials like lithium and nickel whose prices can swing sharply. The US government's new tariff regime in 2025 is already raising costs, and it hits Tesla's energy business harder than its car business. The One Big Beautiful Bill Act, signed into law on July 4, 2025, stripped away consumer tax credits for electric vehicles, removing a financial incentive that had been helping buyers justify the purchase price. Regulatory credit sales — which added nearly $2 billion to revenue in 2025 — are also being squeezed by the same legislation.

The autonomous driving ambition carries its own layer of risk. Tesla vehicles have been involved in crashes tied to its driver-assistance systems, and courts or regulators could impose restrictions, force costly recalls, or expose the company to significant liability. Beyond safety, the regulatory landscape for driverless cars is still being written — each US state, European country, and major market like China has different rules, and some have restrictions that could delay or block the Robotaxi expansion entirely. And even if the technology works and regulators permit it, customers may simply not adopt autonomous ride-hailing as quickly as Tesla needs them to.

The energy storage segment offers a partial counterweight to these pressures. Revenue there jumped 27% in 2025 to $12.8 billion, and its gross margin of 29.8% now exceeds the automotive segment's 17.8%. Megapack — Tesla's large-scale grid battery — is benefiting from surging demand for energy storage as AI data centres and the broader power grid require more flexible electricity supply. But import tariffs on battery components are a direct threat to this business too, and the OBBBA has curtailed residential energy credits.