Tesla posted record revenue in its latest quarter but saw profits plunge. The company’s earnings were dragged down by higher tariffs, growing research costs, and fierce competition in the electric vehicle market.
Record revenue fails to stop profit slide
For the three months ending in September, Tesla reported $28 billion (£21 billion) in revenue, up 12% from last year. Despite this record figure, profits fell by 37%. Rising tariffs and increased research spending were the main reasons for the decline.
Investors reacted with caution. Tesla’s shares dropped 3.8% in after-hours trading after the announcement. Still, the company’s market value remains about $1.4 trillion, supported by confidence in Elon Musk’s ambition to turn Tesla into a leader in artificial intelligence and robotics.
Tax credit rush fuels late sales boost
Tesla managed to end its sales slump thanks to a rush of American buyers eager to claim federal tax credits of up to $7,500 before they expired in September. The surge helped Tesla reverse its recent sales decline, but rivals like Ford and Hyundai achieved even faster US growth in the same period.
During the quarter, Tesla launched a six-seat version of its top-selling Model Y, which performed especially well in China. To attract more customers, the company offered incentives such as five-year interest-free loans and insurance subsidies.
Tariffs and R&D costs drag down earnings
Tariffs on imported parts and materials remain a major challenge. Finance chief Vaibhav Taneja said these levies, introduced under President Donald Trump, cost Tesla more than $400 million last quarter.
At the same time, the company boosted investment in research and development, focusing heavily on artificial intelligence. Taneja said spending in this area would continue to rise as Tesla pushes deeper into automation and advanced software.
Cheaper models fail to impress markets
In October, Tesla launched new budget versions of its Model Y and Model 3 in the United States. Each costs around $5,000 less than earlier versions, an attempt to lift sales after federal incentives ended.
However, the new cars failed to excite investors. Tesla’s stock fell further as markets viewed the rollout as underwhelming. Analysts argue that Tesla’s slow progress toward affordable models has allowed competitors to strengthen their position in the global electric vehicle race.
