Tesla Inc. (NASDAQ: TSLA) reported weaker-than-expected third-quarter earnings on Wednesday, as profit margins took a significant hit from aggressive price cuts and ongoing trade tariffs.
Despite a record number of vehicle deliveries and strong revenue growth, the electric vehicle (EV) giant’s stock slipped roughly 3% in after-hours trading.
For the quarter ended September 30, Tesla posted revenue of $28.01 billion, a 12% year-over-year increase from $25.18 billion, surpassing analyst expectations of $26.27 billion.
However, profit declined 37% to $1.4 billion, with adjusted earnings per share coming in at $0.50, missing the $0.54 Wall Street forecast.
Operating income fell 40% to $1.62 billion, as lower margins and reduced regulatory credit revenue weighed heavily on results.
Tesla said the steep decline in profitability was primarily due to price reductions across its lineup and lower earnings from clean-air credit sales.
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The automaker slashed prices for its popular Model 3 and Model Y vehicles to maintain demand in a more competitive EV landscape.
To attract cost-conscious buyers, Tesla also introduced new “standard” versions of both models this month — priced at $36,990 and $39,990, respectively — featuring smaller batteries and fewer luxury features.
CEO Elon Musk remained upbeat despite the financial challenges, emphasizing that the company’s next major growth phase lies in autonomous driving and AI-powered products.
“We expect to have no safety drivers in large parts of Austin by the end of this year,” Musk said during Tesla’s earnings call.
The company is currently running a pilot Robotaxi service in the Bay Area and plans to expand testing to 8–10 major U.S. metro areas, including Nevada, Florida, and Arizona, before year-end.
While Musk called the rollout “cautious,” analysts see the Robotaxi project as a transformative step for Tesla’s valuation.
Wedbush Securities’ Dan Ives said the autonomous business could unlock “$1 trillion in value” for Tesla over the coming years, calling it the company’s most important growth chapter since the launch of the Model 3.
Still, short-term headwinds remain. The expiration of the U.S. federal EV tax credit at the end of Q3 could pressure demand in the coming months.
Additionally, Tesla said its tariff-related costs rose to $400 million in the quarter, up from $300 million in Q2, reflecting the impact of ongoing trade tensions and higher raw material costs.
Despite challenges, Tesla achieved record quarterly deliveries of 497,099 vehicles and deployed 12.5 gigawatt-hours of energy storage — both company milestones.
But as Musk warned investors earlier, the post-tax-credit period could bring “a few rough quarters” ahead.
Investors will now be watching Tesla’s November 6 shareholder meeting, where a vote is expected on Musk’s proposed $1 trillion compensation package – a move already drawing sharp criticism from proxy advisers.
For now, Tesla’s future hinges on balancing affordability with innovation, as the company races toward a self-driving future while navigating mounting economic and regulatory pressures.
Sources: Nytimes, Yahoo Finance
