Tesla’s latest financial results reveal a sharp contrast between rising sales and shrinking profits. The electric car maker recorded its highest-ever quarterly revenue, driven by a rush of US buyers eager to secure a federal tax credit before it expired.
Record-breaking revenue, but profits tumble
For the three months ending in September, Tesla reported revenue of $28 billion (£21 billion), a 12% increase compared to last year. Yet profits for the same period dropped by 37%. The decline partly stems from higher costs related to tariffs and expanding research efforts.
Investors reacted swiftly. Tesla shares fell by nearly 3.8% in after-hours trading following the announcement. Despite the dip, the company still holds an estimated $1.4 trillion market valuation. This figure reflects investor belief in Elon Musk’s vision to turn Tesla into a powerhouse in artificial intelligence and robotics.
US buyers rush before tax credit deadline
Tesla’s sales surged in the US as customers hurried to benefit from federal tax credits worth up to $7,500 before their expiration in late September. The rush helped the company reverse a trend of declining quarterly sales. Yet, rivals like Ford and Hyundai recorded even stronger sales growth during the same period, underscoring Tesla’s growing competition.
Tesla launched a six-seat version of its best-selling Model Y during the quarter, which performed particularly well in China. The company also introduced customer incentives, including five-year interest-free loans and insurance subsidies, to strengthen demand.
Tariffs hit hard as research costs climb
Tesla continues to face financial pressure from tariffs on imported car parts and raw materials introduced under President Donald Trump. Finance chief Vaibhav Taneja told investors that tariffs cost the company over $400 million last quarter.
Rising research and development expenses, especially in artificial intelligence, further weighed on earnings. Taneja said such spending would continue to grow as Tesla deepens its focus on innovation.
Cheaper models aim to revive sales
In October, Tesla introduced lower-priced versions of its popular Model Y and Model 3 vehicles in the US, cutting costs by around $5,000 compared to earlier models. The move aimed to stimulate demand after the end of federal incentives.
However, investors reacted cautiously. Tesla’s shares slipped further as the market viewed the new cars as underwhelming. Critics argue the company has been too slow to offer affordable options, allowing competitors to gain valuable ground in the fast-evolving electric vehicle market.
