Tesla achieved its highest-ever quarterly revenue, yet profits fell sharply. Rising tariffs, research costs, and strong competition pressured the company’s earnings despite robust sales.
Revenue climbs, profits slide
In the quarter ending September, Tesla reported $28 billion (£21 billion) in revenue, a 12% increase from last year. Profit, however, dropped 37% due to higher tariffs and expanding research and development expenses.
Investors responded cautiously. Tesla shares fell 3.8% in after-hours trading following the results. Still, the company maintains a market value of around $1.4 trillion, driven by confidence in Elon Musk’s AI and robotics ambitions.
Tax credit rush drives US sales
Tesla reversed declining quarterly sales as US buyers rushed to claim federal tax credits of up to $7,500 before they expired in September. The surge lifted Tesla’s numbers, but rivals like Ford and Hyundai recorded even stronger growth.
During the quarter, Tesla launched a six-seat Model Y, which proved especially popular in China. The company also offered incentives such as five-year interest-free loans and insurance subsidies to boost demand.
Tariffs and research spending squeeze profits
Tariffs on imported parts and raw materials remain a significant challenge. Finance chief Vaibhav Taneja said these levies cost Tesla over $400 million last quarter.
Research and development expenses also rose, particularly in artificial intelligence. Taneja said Tesla expects this type of spending to continue as it expands technology and automation projects.
Cheaper models fail to excite investors
In October, Tesla unveiled lower-priced versions of its Model Y and Model 3 in the US, reducing prices by about $5,000 per vehicle to sustain sales after federal incentives ended.
However, investors remained unimpressed. Tesla shares slipped further as markets saw limited appeal in the new models. Analysts argue that the company’s slow introduction of affordable vehicles has allowed competitors to gain ground in the rapidly growing electric car market.
