Tesla profits fall by 37% despite strong sales

News

On Wednesday, Tesla announced that its profits had fallen by 37%, to $1.4 billion, compared with the previous year.

Despite the drop in profits, Tesla sold more cars between July and September than it did in the third quarter of the previous year. Many analysts have attributed this surge in sales to the reversal of the EV tax credit under the Trump administration, which saw many buyers rushing to buy EVs while the incentives were still in effect.

Tesla’s profit downturn is the result of several contributing factors, notably the its recent decision to cut the price of many of its models in an attempt to boost sales.

The company, headed by Elon Musk, reduced the price of its Model 3 sedan and Model Y sport utility vehicles and rolled out low-interest loans for many of its popular models.

Many buyers took advantage of this discount, which saw many Tesla vehicles retailing at $5,000 less than the previous month.

Another key reason for Tesla’s sliding profits is the impact of Trump’s tariffs. Whilst Tesla manufactures all of its vehicles domestically, in California and Texas, rising costs of imported raw materials have dealt a blow to the company’s profit margins.

The ongoing Trade disputes between China and the USA have seen hefty tariffs placed on rare-earth materials that are used in the manufacturing process of electric vehicle batteries and other vital components. Tariffs have wreaked havoc on the global supply chain, driving up manufacturing costs for many automakers.

Tesla issued a statement responding to shareholder anxieties saying,

“It is difficult to measure the impacts of shifting global trade and fiscal policies on the automotive and energy supply chains, our cost structure and demand for durable goods and related services.”

Higher overheads have not been the only challenge for Tesla; the company have also lost out on a major source of revenue through the reversal of the clean air credit scheme, which allowed companies to purchase and sell carbon credits. In 2024, the company made $2.76 billion from selling clean air credits alone. With Trump’s rollback of climate policy, Tesla has lost a significant stream of income.

Tesla will hold its annual meeting on Nov. 6.

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