Tesla’s Profit Drops 37% as Price Cuts Weigh on Earnings
PALO ALTO, Calif. — Tesla reported a sharp decline in quarterly profit on Wednesday, as the company’s aggressive price cuts and lower revenue from regulatory credits took a toll on its bottom line.
The electric vehicle maker said third-quarter profit fell 37 percent to $1.4 billion, compared with the same period last year. Revenue, however, climbed 12 percent to $28.1 billion, driven by higher vehicle deliveries between July and September.
Despite selling more cars, Tesla earned less per vehicle after slashing prices and offering low-interest financing on its popular Model 3 sedan and Model Y SUV. Earlier this month, the company trimmed prices again, introducing new, stripped-down versions of both models at about $5,000 less than the previous entry-level versions.
Tesla said that tariffs on imported raw materials and components also squeezed profits. Although the company builds all its U.S. vehicles in California and Texas, it still relies on parts sourced abroad.
In its statement, Tesla declined to issue formal guidance for sales or earnings, citing the difficulty of predicting “the impacts of shifting global trade and fiscal policies on the automotive and energy supply chains, cost structure, and demand.”
Shareholder Vote Looms Over Musk’s $1 Trillion Pay Package
The report comes ahead of a critical shareholder vote on Elon Musk’s proposed pay package, which could be worth up to $1 trillion if the company meets specific profit, sales, and valuation milestones. Tesla’s annual meeting is set for November 6.
Analysts had anticipated Tesla might aim to deliver an upbeat report to strengthen Musk’s case before the vote. But the figures underscored how volatile the company’s earnings remain amid global competition and economic uncertainty.
Focus Shifts Beyond Car Sales
For Musk’s supporters, Tesla’s short-term profit is less important than its long-term ambitions — notably in self-driving technology and humanoid robotics. They argue that every car Tesla sells adds to the company’s AI training data, helping to refine its autonomous driving systems.
“Every new car sold feeds that machine,” said Shay Boloor, chief market strategist at Futurum Equities, in a note ahead of the earnings release.
Still, skeptics point to the company’s sky-high valuation relative to its profits. Tesla earned roughly the same as General Motors — $1.3 billion last quarter — yet its market capitalization remains more than 20 times larger, at about $1.4 trillion versus GM’s $64 billion. Tesla shares slipped 1.5 percent in after-hours trading Wednesday.
EV Market Pressure and Declining Credit Revenue
Tesla’s U.S. electric vehicle market share dropped to 41 percent in the third quarter, down from 48 percent a year ago, according to Cox Automotive. Analysts attribute the decline to increasing competition from Chinese, American, and European automakers, who now offer comparable EV technology at lower prices.
The company also saw a steep decline in its clean-air credit revenue, which fell 44 percent to $417 million. Those credits, once a major profit driver, have lost value after President Trump and Congressional Republicans rolled back several environmental regulations, allowing legacy automakers to sidestep such purchases.
One area of strength was Tesla’s energy storage business, where sales of large-scale batteries jumped 44 percent to $3.4 billion, reflecting growing demand for renewable energy storage solutions.
Outlook
While Tesla’s immediate financial outlook remains uncertain, investors are watching closely to see whether Musk can turn the company’s bold visions — from self-driving fleets to robotic labor — into sustainable profits.
For now, Wall Street remains divided: some see Tesla as a tech pioneer positioned for the future; others see an automaker whose valuation far outpaces its fundamentals.