Tesla posted its highest quarterly revenue ever, yet profits dropped steeply. Rising tariffs, growing research costs, and stiff competition weighed on earnings despite strong sales.
Record revenue masks profit decline
For the quarter ending September, Tesla reported $28 billion (£21 billion) in revenue, a 12% increase from last year. Profits, however, fell 37%, affected by higher tariffs and increased spending on research and development.
Investors reacted cautiously. Tesla shares fell 3.8% in after-hours trading after the results. Still, the company’s market value remains around $1.4 trillion, fueled by confidence in Elon Musk’s long-term plans for AI and robotics.
Tax credit rush drives US demand
Tesla reversed a drop in quarterly sales as American buyers rushed to secure federal tax credits of up to $7,500 before they expired in September. The surge boosted Tesla’s sales, but competitors like Ford and Hyundai reported even stronger growth during the same period.
The company also rolled out a six-seat Model Y, which proved particularly popular in China. Tesla offered additional incentives, including five-year interest-free loans and insurance subsidies, to attract more buyers.
Tariffs and R&D spending squeeze profits
US tariffs on imported parts and raw materials continue to challenge Tesla. Finance chief Vaibhav Taneja said the company paid more than $400 million in tariff costs last quarter.
Meanwhile, research and development costs, especially in artificial intelligence, increased further. Taneja said Tesla expects these expenses to keep rising as it advances automation and technology initiatives.
Cheaper models fail to excite investors
In October, Tesla launched lower-priced versions of its Model Y and Model 3 in the US, cutting prices by around $5,000 per vehicle to maintain demand after federal incentives ended.
Yet investors remained cautious. Tesla’s shares fell further as markets reacted lukewarmly. Analysts argue that Tesla’s slow rollout of affordable cars has allowed competitors to gain ground in the fast-growing electric vehicle market.
