Tesla profit drops as record sales meet tariffs and rising R&D spend

Tesla’s profit fell despite record quarterly revenue, as US buyers rushed to secure expiring tax credits and the carmaker absorbed higher costs tied to tariffs and research spending.

The company reported revenue of $28 billion for the three months to the end of September, up 12% year-over-year, but said net profit declined 37% over the same period. 

Finance chief Vaibhav Taneja told investors that tariffs cost more than $400 million in the quarter, while rising outlays—particularly on AI and robotics R&D—also weighed on earnings.

Shares slipped about 3.8% in after-hours trading as investors digested the figures. Tesla’s roughly $ 1.4 trillion market value has been buoyed by confidence in CEO Elon Musk’s longer-term AI ambitions, but vehicles remain the firm’s primary revenue source for now, amid intensifying competition from Chinese rivals such as BYD.

Tesla reversed a run of declining quarterly sales, helped by US buyers seeking up to $7,500 in federal credits before they expired at the end of September. Nevertheless, competitors, including Ford and Hyundai, reported stronger US growth during the same period.

The firm pushed demand with incentives—such as five-year interest-free loans and insurance subsidies—and introduced a six-seat Model Y that performed strongly in China. 

In October, Tesla also unveiled cheaper US variants of the Model Y and Model 3, priced approximately $5,000 below their prior versions, although the market reaction was lukewarm.

Shareholders are scheduled to vote in November on a new compensation package for Musk, which could be worth as much as $ 1 trillion.