Tesla reached its highest quarterly revenue, yet profits fell sharply. Rising tariffs, growing research costs, and global competition pressured earnings despite strong sales.
Record revenue masks profit decline
For the quarter ending September, Tesla reported $28 billion (£21 billion) in revenue, up 12% from last year. Profits fell 37% due to higher tariffs and increased spending on research and development.
Investors reacted cautiously. Tesla shares dropped 3.8% in after-hours trading. Still, the company’s market value remains around $1.4 trillion, driven by confidence in Elon Musk’s long-term ambitions in AI and robotics.
US tax credit drives sales surge
Tesla reversed a decline in quarterly sales as American buyers rushed to claim federal tax credits of up to $7,500 before they expired in September. The rush boosted Tesla’s numbers, but competitors like Ford and Hyundai recorded even stronger growth.
Tesla also launched a six-seat Model Y, which performed particularly well in China. The company offered additional incentives, including five-year interest-free loans and insurance subsidies, to attract buyers.
Tariffs and research spending squeeze profits
Tariffs on imported car parts and raw materials continue to challenge Tesla. Finance chief Vaibhav Taneja said these costs exceeded $400 million last quarter.
Research and development expenses also climbed, especially in artificial intelligence. Taneja said Tesla expects spending to continue rising as the company expands automation and technology initiatives.
Cheaper models fail to impress investors
In October, Tesla unveiled lower-cost versions of its Model Y and Model 3 in the US, cutting prices by about $5,000 per vehicle to boost demand after federal incentives ended.
Investors remained unimpressed. Tesla shares fell further as markets reacted lukewarmly. Analysts say Tesla’s slow rollout of affordable cars has allowed rivals to gain ground in the growing electric vehicle market.
