Tesla profit falls 37% to $1.4 billion on higher costs, tariffs despite record sales

Tesla released third-quarter results on Thursday, October 23, which showed that its profit fell short of Wall Street expectations, despite record electric vehicle sales, highlighting the pressures automakers face from changing federal policies and rising costs.

Outpacing expectations, the electric vehicle maker reported total revenue of $28.1 billion for the third quarter ended September 30. Profit per share in the third quarter was 50 cents, below analysts' estimates of 55 cents. Tesla reported gross margin of 18 per cent.

As Tesla declared its third quarter results, its shares slipped 2 per cent at 4:30 pm (US time) in extended trading.

The company also said that it is focused on long-term growth as it also faces uncertainties from tariffs and fiscal policies under the Trump administration. Tesla sees results hinging on the broader economic environment as well as its speed in accelerating autonomy efforts and ramping up production for key products.

In a statement, the company said, “While we face near-term uncertainty from shifting trade, tariff and fiscal policy, we are focused on long-term growth and value creation.” Also Read | Wall Street today: US stocks slip ahead of Tesla results, Netflix plunges 10%

Record third-quarter sales

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 Sept. 30, delivering a temporary boost to the company’s core automotive business.

Tesla reported $417 million in revenue from regulatory credits it receives from other automakers that exceed emissions standards — only slightly below the previous quarter’s amount. Policy changes under the Trump administration have reduced demand for the credits. Tesla has said it anticipated a decline in that business.

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The release offered limited updates on key areas such as Tesla’s robotaxi business, which launched in Austin in June. The company also operates a rideshare service in the Bay Area, and it didn’t give an update on when it expects to run that business fully autonomously.

The results underscored the significant cost increases automakers are grappling with in an environment of import tariffs and inflation. Tesla’s operating expenses soared 50% to $3.4 billion in the quarter.

Free cash flow was nearly $4 billion, up significantly from the previous year and well above the average analyst estimate of $1.25 billion.

(With Bloomberg inputs)