Tesla's Profit Plunges 31% as Soaring Costs Overshadow Record EV Sales

Tesla Inc.’s profit plunged sharply in the third quarter despite record vehicle sales, as soaring expenses and trade-related costs strained its operations. The automaker reported a 40% year-on-year drop in operating profit, revealing growing pressure on its core electric vehicle (EV) business even as CEO Elon Musk pivots attention toward artificial intelligence and robotics initiatives.

Key Development

Adjusted earnings stood at 50 cents per share, down 31% from the previous year, missing analyst expectations of 54 cents, according to Bloomberg data. Operating expenses surged 50% to $3.4 billion, partly due to $400 million in US tariffs under new policy shifts. 

Tesla also recorded its fourth consecutive quarter of weaker-than-expected profit, signalling persistent operational challenges.

AI Ambitions and Investor Concerns

Musk devoted much of the earnings call to promoting Tesla’s humanoid robot, Optimus, calling it potentially “the biggest product of all time” but “incredibly difficult to bring to market.” Manufacturing lines for Optimus are being set up, with production targeted by the end of next year.

He also linked the robot initiative to his plea for shareholders to back his trillion-dollar pay package, arguing that he needs firm control to advance Tesla’s long-term vision.

Record Sales but Mounting Pressures

Tesla reported record third-quarter sales, spurred by a rush of US buyers leveraging a $7,500 EV tax credit before its September expiry. CFO Vaibhav Taneja noted that both tariffs and rising competition continue to challenge the company’s profitability.

Robotaxis and Revenue Challenges

Musk said Tesla’s robotaxi business in Austin could expand to 10 US cities by year-end, pending regulatory approvals. Revenue from regulatory credits stood at $417 million, marginally down from the previous quarter, reflecting reduced demand due to policy changes.

Read More: Tesla Unveils Cheaper Versions of 2 EVs to Boost Sales Amid Market Challenges!

Conclusion

While Musk’s AI and robotics ambitions hint at a transformative future, analysts argue Tesla’s immediate challenges lie in reviving its automotive margins and maintaining investor confidence amid rising costs and uncertain growth drivers.

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