Tesla’s Record Revenue Overshadowed by Profit Shortfall Amid Rising Costs
Tesla has stunned Wall Street with its highest-ever third-quarter revenue, surpassing expectations as it capitalized on soaring electric vehicle sales. However, this financial triumph was not without its setbacks, as the company struggled with profit margins due to increasing costs and diminishing regulatory credit income.
Tesla’s revenue reached a record $28.1 billion for the quarter ending September 30, outpacing the projected $26.37 billion according to LSEG data. Yet, profits did not meet analyst expectations, registering at 50 cents per share compared to the anticipated 55 cents. The decline in profits can be attributed to several factors, including tariffs and research expenses.
The Austin, Texas-based company, valued at $1.45 trillion, witnessed a 4% dip in its stock during extended trading. This drop reflects investor concerns as Tesla navigates challenges such as the fading impact of regulatory credits and the removal of a crucial tax credit for U.S. buyers, a driving force behind its sales surge.
The company is also grappling with tariffs on auto-part imports, a legacy of the Trump administration, costing over $400 million this quarter. “While we face near-term uncertainty from shifting trade, tariff and fiscal policy, we are focused on long-term growth and value creation,” Tesla stated.
In response to anticipated demand fluctuations, Tesla introduced more affordable “Standard” versions of its Model Y and Model 3 vehicles, effectively lowering their prices by $5,000 to $5,500. This move aims to boost sales but could potentially compress margins, as noted by analysts.
Meanwhile, Tesla’s focus on innovation remains steadfast. The company is progressing with its robotics and AI initiatives, including the first-generation production line for its Optimus humanoid robot. Capital expenditures are projected to rise significantly by 2026, indicating a commitment to future growth.
Tesla’s energy sector also highlighted a robust performance, with an 81% increase in storage deployment. However, the automotive regulatory credits, once a profit cornerstone, dwindled to $417 million, a sharp decline from the previous year’s $739 million.
The EV giant’s automotive gross margin, excluding regulatory credits, stood at 15.4%, slightly below the 15.6% expected by analysts. Tesla’s emerging robotaxi service in Austin marks a strategic pivot as the company eyes a shift from traditional vehicle sales to autonomous driving technologies.
CEO Elon Musk announced plans for robotaxis to operate without safety drivers in Austin later this year, with an expansion to several metropolitan areas envisioned by year’s end. Despite these ambitious plans, Wall Street anticipates an 8.5% drop in Tesla’s deliveries by 2025, owing to the expiration of tax credits and intensifying competition.
While Tesla’s initiatives are poised to reshape the industry, some analysts remain skeptical of the cheaper vehicle versions, fearing they might cannibalize sales of higher-margin models.
Original Story at finance.yahoo.com