Tesla’s Profits Plunge 31% Even with Record EV Sales Amid Rising Costs
Tesla Inc’s profit has significantly decreased as escalating costs have undermined a record quarter of vehicle sales, revealing pressures on its operations while Chief Executive Officer Elon Musk redirects attention from the automotive sector. Musk utilized Tesla’s third-quarter earnings report to promote ambitious yet vague initiatives, such as the company’s humanoid robot and artificial intelligence programs, while also urging investors to support his trillion-dollar compensation package. However, he provided limited information regarding Tesla’s strategy to rejuvenate its primary business of selling electric vehicles following a 40 percent decline in operating profit. “We’re left with this lingering uncertainty regarding what the near-term growth drivers will be,” stated Garrett Nelson. In a statement released Wednesday, the company reported that adjusted earnings were 50 cents a share for the period, reflecting a 31 percent decline compared to the previous year. Analysts had anticipated an average of 54 cents.
The results, which extended a string of four consecutive quarters of disappointing profit, indicate that the company is not shielded from the escalating costs affecting the auto industry amid President Donald Trump’s significant policy changes in the US. Tesla’s operating expenses surged by 50 percent, reaching $3.4 billion in the quarter, and the company now estimates that the effect of US tariffs amounted to $400 million during this period. Musk has consistently articulated a future centered on AI, robots, and self-driving technology — a vision that has prompted investors to drive up the stock price. However, concerns are increasing regarding the timeline for developing these businesses and the expenses linked to their construction, and Tesla provided limited responses in its most recent report. The shares fell by 3.8 percent at 8:22 p.m. during extended trading in New York. “The market’s realizing Tesla trades like an AI platform, but reports like a carmaker,” stated Haris Khurshid. Dec Mullarkey remarked: “There is not much here to inspire investors.”
Musk dedicated a considerable amount of time during the call to discussing Tesla’s forthcoming humanoid robot, Optimus. He expressed his belief that it could become the “biggest product of all time,” yet acknowledged that it is “incredibly difficult to bring to market.” The company announced that manufacturing lines are currently being installed for the robot, with the goal of commencing production by the end of next year. Musk also emphasized Optimus in his appeal to investors regarding his pay package, which would grant him increased voting control of Tesla. He stated that he does not wish to create a “robot army” if he could be removed in the future. The company restated its previous quarter’s assertion that it’s “difficult to measure” the effects of changing global trade and fiscal policies on its businesses and operations. Results depend on the wider economic landscape, alongside the pace of advancing autonomy initiatives and increasing production for essential products. Vaibhav Taneja recognized that competition and tariffs pose challenges for the company.
Earlier this month, Tesla reported record third-quarter sales as customers rushed to take advantage of a $7,500 US tax credit for EV purchases that expired on Sept. 30, delivering a temporary boost to the company’s core automotive business. However, this also indicates that EVs have become more costly, which could impede performance in the future. Analysts anticipate that Tesla will announce a second consecutive year of declining vehicle deliveries. Musk anticipates that Tesla’s robotaxi business, which commenced operations in Austin in June, could extend to as many as 10 metropolitan areas by year’s end, contingent upon obtaining the required approvals. The company announced it would eliminate the majority of human safety operators from robotaxis in Austin later this year. Tesla operates a rideshare service in the San Francisco Bay area that is not fully autonomous and resembles Uber more closely, and it possesses test permits for Arizona and Nevada. On Wednesday, Tesla disclosed $417 million in revenue derived from regulatory credits obtained from other automakers that surpass emissions standards — a figure that is only marginally lower than the amount reported in the previous quarter. Changes in policy during the Trump administration have led to a decline in demand for the credits. Tesla has indicated that it expects a downturn in that sector. “Tesla has been out of ideas and out of runway for several quarters now, so I don’t see anything particularly interesting happening there,” stated Olivier Blanchard. While robotaxis hold promise, he stated, issues surrounding scale and competition “don’t provide a credible path to real revenue growth.”
