Author | Jiang Xu Explore More Financial Insights | BT Finance Data Pass Main article spans 3,208 words, with an estimated reading time of 9 minutes

On April 22, after the market closed, Tesla unveiled its earnings report for the first quarter of 2026.

Investors were immediately drawn to a striking figure: a gross margin of 21.1%, marking a significant leap of 478 basis points year-over-year and surpassing the previous quarter's 20.1%.

Tesla's stock price responded positively, jumping over 5% in after-hours trading.

However, U.S. tech media outlet Electrek, in an article published the same evening as the earnings release, pointed out that this substantial gross margin increase was largely attributable to two one-off factors.

One is tariff refunds, and the other is warranty accounting adjustments.

1

Let's Dive into the Numbers

Here are the key takeaways from Tesla's Q1 2026 earnings report:

Revenue: $22.38 billion—closely aligning with Wall Street's expectation of $22.3 billion.

Non-GAAP EPS: $0.41—surpassing expectations of $0.37, a pleasant surprise.

Gross Margin: 21.1%—a notable increase of 478 basis points from 16.3% year-over-year.

The after-hours stock price soared over 5%, with the market initially reacting with, "Tesla has finally turned the corner on profitability."

Yet, a closer look at the composition of these numbers is warranted.

Q1 Revenue: $22.38 billion (Wall Street expectation: $22.3 billion)

Non-GAAP EPS: $0.41 (expectation: $0.37, 12% above forecast)

Q1 Gross Margin: 21.1% (year-over-year increase of 478 basis points)

Q1 Deliveries: 358,000 vehicles (expectation: 365,600, falling short by 7,600)

Q1 Production-Delivery Gap: 50,363 vehicles (approximately 50,000 units in inventory)

Energy Storage Deployments: 8.8 GWh (a decrease of about 38% from Q4 2025's 14.2 GWh)

Data Sources: Tesla Q1 2026 Shareholder Letter, Electrek, Wall Street Journal

2

Unpacking the Impressive Figures

Electrek directly stated in its article:

When discussing the profit improvement in Q1, Tesla's earnings report first highlighted one-time gains related to warranties and tariffs in its automotive business.

According to Electrek, Tesla prematurely recognized a tariff refund from the U.S. government and, coupled with a reevaluation of historical warranty reserves on the accounting front, these two non-recurring gains collectively inflated Q1's gross margin.

The Nature of One-Time Gains

What distinguishes one-time gains from operational gains?

Operational gains are recurring each quarter—representing the profit made per vehicle sold.

One-time gains are "here today, gone tomorrow"—tariff refunds like these do not occur every quarter.

When a company's gross margin spikes, but the increase is primarily driven by one-time gains, the market's rational response should be:

This figure may not be sustainable next quarter.

3

The Core Automotive Business

Tesla actually reports two sets of gross margins each quarter:

One is the overall gross margin including regulatory credits—which stands at 21.1% for this quarter;

The other is the automotive gross margin excluding regulatory credits—representing the true profit from selling cars.

Revenue from regulatory credits comes from other automakers purchasing carbon credits from Tesla to meet emissions standards.

This revenue is nearly pure profit—with minimal costs.

However, it does not reflect Tesla's earnings from selling cars; rather, it's additional income stemming from U.S. emissions policies.

After excluding this portion, Tesla's automotive gross margin was 17.9% in Q4 2025 and only 15.4% in Q3.

By placing this historical context alongside the current figure, we can better grasp the true value of the 21.1%.

Profit from selling cars and profit from selling carbon credits are two distinct concepts.

4

Gross Margins of Chinese Electric Vehicle Manufacturers

Let's compare Tesla with China's new energy vehicle companies and BYD:

BYD

In 2024, BYD's overall gross margin was 18%, matching Tesla's for the same period.

But BYD's structure is transparent:

No regulatory credit revenue, no high-margin energy storage offset, no service business profit adjustments.

Its gross margin comes almost entirely from selling cars.

Moreover, BYD's average export vehicle price is 2.4 times that of its domestic models, and the growth of its overseas business will continue to boost its overall gross margin.

Li Auto

In 2024, Li Auto's gross margin was approximately 21%, comparable to Tesla's Q1 figure of 21.1%.

Li Auto's profit sources are also clear: high average selling prices for its extended-range SUVs, with no business selling carbon credits.

However, its volume is only about 1/4 of Tesla's, and economies of scale have not yet been fully realized.

Xiaomi Automobile

Xiaomi Group's overall gross margin is about 21%, with its automotive business turning a profit for the first time in Q4 and per-vehicle gross profit improving quarterly.

The product strength and pricing of the SU7 and YU7 give Xiaomi Automobile a vehicle price structure superior to the industry average.

From this, we can draw a relatively straightforward conclusion:

After excluding one-time gains and regulatory credits, Tesla's true automotive gross margin is roughly in the 17%-18% range—largely in line with BYD and slightly lower than Li Auto.

This is not a simplistic judgment that "Tesla is inferior to Chinese automakers." Rather:

The era when "Tesla had a 30% gross margin, significantly leading its peers" ended two years ago.

5

Other Developments

During the earnings call, Tesla also hinted at several things the market had hoped for but where progress fell short of expectations:

Robotaxi Expansion to 5 Cities Delayed

Tesla had previously planned to expand its Robotaxi service to five new U.S. cities this year. The earnings report hinted that this expansion would be delayed.

Meanwhile, Waymo has been fully commercially operating in cities like Dallas and Houston for over two months.

Consumer-Facing FSD Delayed Again

Elon Musk once again postponed the release of unsupervised Full Self-Driving (FSD) for consumers. The market had expected it to land in Q2 2026, but it is now pushed back to the end of the year or even later.

This marks the sixth delay in FSD's commercialization commitment.

Energy Storage Business Sees Sharp Quarterly Decline

Energy storage deployments plunged from 14.2 GWh in Q4 2025 to 8.8 GWh, a quarterly decrease of about -38%.

With a gross margin close to 30%, energy storage is nearly twice as profitable as the automotive business. This segment had been a relatively stable profit pillar for Tesla over the past year.

A sharp decline in one quarter means we'll have to see if it recovers in Q2.

6

A Broader Perspective

Putting all this information together, the real story of Tesla's Q1 earnings report is this:

Car sales are okay, but not as good as they look—true automotive gross margin is about 17%-18%, on par with BYD.

Energy storage has seen a sharp decline—the most stable pillar is now fluctuating.

Robotaxi and FSD—two valuation narratives are both being delayed.

One-time tariff refunds and warranty adjustments—boosted this quarter's earnings figures.

Some analysts point out that what truly deserves attention in this earnings report is not the EPS beat but rather:

After stripping away one-time gains, Tesla's core profitability is now close to that of leading Chinese new energy vehicle companies.

This means the market may need to re-examine a question—

Should Tesla's current price-to-earnings ratio be benchmarked against automotive companies or AI companies?

As Tesla's car-selling business gradually aligns with BYD and Li Auto, the main factors supporting its high valuation are the future stories of Optimus, Robotaxi, and Dojo computing power.

And the timelines for these stories' realization are being continuously pushed back.

Stripping away one-time gains reveals the true car-selling business.

Understanding this earnings report requires looking at one more metric and reading one more line of fine print.

Tariff refunds are beneficial, but they won't occur every quarter.

Regulatory credits are additional income, but they don't represent true car-selling prowess.

When these two factors no longer play a similar role next quarter, Tesla's core business gross margin performance—Q2 earnings will provide a clearer window for observation.

(The listed company names such as Tesla, BYD, Li Auto, and Xiaomi Group mentioned in this article are used solely for horizontal comparison and analysis of financial data and do not constitute any buy or sell recommendations for individual stocks. Related investment decisions should refer to professional institutional research reports.) This article is for information sharing and industry analysis only and does not constitute any investment advice, investment analysis opinions, or trading solicitations. The market carries risks, and investments should be made cautiously. Anyone making investment decisions based on this article's content bears the risks and gains or losses themselves, and the author and publishing platform assume no legal responsibility.

Information Sources

1. Electrek: Tesla (TSLA) releases Q1 2026 financial results: slight beat on earnings (April 22, 2026, Fred Lambert)

2. Electrek: Tesla (TSLA) pulled questionable levers to make Q1 2026 financials look good (April 22, 2026)

3. Tesla Q1 2026 Shareholder Letter (Tesla official investor relations, April 22, 2026)

4. Wall Street Journal: Key information from Tesla's Q1 earnings call (April 22, 2026)

5. TradingKey: Tesla 2026 Q1 earnings preview—50,000 units in inventory and 5 core metrics (April 21, 2026)

6. Quantum Bit: Analysis of the nature of regulatory credits

7. Sina Finance: 2024 automotive gross margin comparison—BYD and Tesla both at 18% (April 2025)

8. 36Kr: Gross margin surpasses Tesla for the first time, but BYD still faces a tough battle (Regarding comparison after excluding regulatory credits)

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