(Reuters)

A battered Tesla topped rock-bottom profitability expectations on Tuesday and said it was on track to produce an affordable car, offering some hope to investors as sales have dropped.

But the electric-vehicle maker said it would have to reassess its growth forecast in three months because it was “difficult to measure the impacts of shifting global trade policy on the automotive and energy supply chains.”

“Uncertainty in the automotive and energy markets continues to increase as rapidly evolving trade policy adversely impacts the global supply chain and cost structure of Tesla and our peers. This dynamic, along with changing political sentiment, could have a meaningful impact on demand for our products in the near-term,” it said.

Tesla has faced a troubling few months as deliveries of its aging lineup of EVs have nosedived, CEO Elon Musk’s political activities have drawn protests, and its stock has nearly halved from its December peak.

Many investors are calling for Musk to leave his work as U.S. President Donald Trump’s adviser and get back to managing Tesla more closely. Tesla showrooms have been vandalized, and sales in California – its largest U.S. market – have fallen sharply.

Tariff tensions add further uncertainty. Tesla has paused some China-sourced component imports after U.S. tariffs on the Asian country rose to 145%, Reuters reported. China has responded with tariffs of its own, leading Tesla to suspend new Model S and Model X orders in the country.

But its stronger-than-expected margin in the first quarter offers some relief, as its cost of making and selling vehicles dropped over 17% year over year, driven by lower raw material prices and reduced expenses of ramping up Cybertruck production.

“Against the backdrop of catastrophic expectations, with everything from sales to margins projected to continue the slump, the less-than-bad numbers have been received as welcome news by Tesla investors,” said Thomas Monteiro, senior analyst at Investing.com. “If this is the worst it gets for Tesla, then certainly there must be some upside for the stock once tailwinds, such as the highly-awaited cheaper model and the Robotaxi, finally hit the market later this year.”

Tesla shares were up 4.4% in after-hours trading on Tuesday.

The company has said it plans to release a cheaper car in the first half of 2025 using existing platforms and assembly lines, after scrapping plans for a brand-new, low-cost model.

It reaffirmed that plan on Tuesday. Reuters reported exclusively last week that Tesla’s affordable models included a stripped-down version of the Model Y SUV but that the start of production would be delayed by at least a few months.

Tesla also said the launch of a robotaxi fleet in Austin, Texas, in June remained on track. The company has been seeking regulatory approvals to that end, but there are serious concerns about safety and related litigation risks that could come with deploying unproven driverless technology on public streets.

Automotive gross margin for the first quarter, excluding regulatory credits, fell to 12.5% from 13.6% in the fourth quarter, according to Reuters calculations, compared with expectations of 11.8%, according to 21 analysts polled by Visible Alpha.

The electric vehicle maker reported revenue of $19.34 billion for the January-March quarter, compared with estimates of $21.11 billion, according to data compiled by LSEG.

Tesla reported earlier this month that deliveries in the January-March period slid 13%, as the company lost ground to Chinese rivals, and Musk’s political actions as a close adviser to U.S. President Donald Trump have damaged the brand.

The company’s stock, which closed at $237.97 on Tuesday, has nearly halved from its December peak.

Analysts expect a second straight annual decline in Tesla deliveries in 2025, despite efforts to boost sales through incentives like free charging and Full Self-Driving features.

Tesla also recalled all Cybertrucks delivered since late 2023 and launched a lower-priced $70,000 version of the vehicle. It has been discounting unsold inventory of the electric pickup truck in recent weeks.