Tesla reported record revenue of $28 billion in the third quarter, but its net profits fell by 37% compared to the same period last year.
This revenue surge was largely driven by U.S. consumers rushing to benefit from federal tax credits on electric vehicles before they expired at the end of September, yet rising costs and fierce competition weighed heavily on earnings.
Elon Musk remains central as shareholders prepare to vote in November on his proposed pay package, potentially valued at nearly $1 trillion. Despite Tesla’s market capitalisation of about $1.4 trillion, the announcement prompted a 3.8% drop in shares during after-hours trading, reflecting concerns over profitability and increasing expenses.
The sharp decline in profits is mainly due to escalating costs from U.S. import tariffs on vehicle parts and raw materials, alongside growing investment in research and development, especially in artificial intelligence and robotics. Tesla aims to pivot towards these technologies to transform itself beyond automotive manufacturing.
Vaibhav Taneja, Tesla’s chief financial officer, disclosed that tariffs alone accounted for over $400 million in costs during the quarter, highlighting the ongoing impact of trade policies introduced under President Donald Trump. Expenditure on AI initiatives remains high and is expected to rise further.
Tesla launched a six-seat version of its popular Model Y this quarter, gaining traction particularly in the Chinese market, where it faces stiff competition from local electric vehicle makers like BYD. Other global rivals, including Ford and Hyundai, also posted strong sales increases in the U.S., leveraging competitively priced electric models and extensive dealer networks.
In October, Tesla introduced lower-priced variants of its Model 3 and Model Y, cutting prices by approximately $5,000 to encourage sales after federal incentives expired. However, investor reaction was muted, showing criticism that Tesla has been slow to roll out more affordable vehicles—a factor blamed for recent loss of market share.