Tesla’s net income slumps 44pc as discounting eats into Q3 profits, Cybertruck set for November launch

Telsa CEO Elon Musk. Photo / Getty Images

Tesla’s net income slumped in the third quarter versus a year earlier, as price reductions helped drive strong sales growth but also ate into the car maker’s profit margins

The Austin, Texas, maker of electric vehicles, solar panels and batteries on Wednesday reported net income of US$1.85 billion for the July-September quarter, a 44per cent decline from a year earlier. Earnings per share fell to 53 cents from 95 cents.

Excluding stock-based compensation, Tesla’s adjusted net income fell to US$2.32b, or 66 cents per share. On that basis, Tesla’s earnings fell short of analysts’ consensus estimate of 73 cents per share, according to FactSet.

Total revenue rose 9per cent to US$23.35b. Analysts had forecast US$24.19b.

Earlier this month, the company reported that it sold 435,059 vehicles during the July-September period, an increase of 27 per cent from the same stretch last year. Even so, Tesla’s deliveries came in below the 461,000 vehicles analysts had predicted the company would sell during the quarter, according to FactSet Research.

The third-quarter sales also marked a step back from Tesla’s 466,140 vehicle deliveries during the April-to-June period, something Tesla blamed on planned downtime to upgrade its factories.

Tesla has been slashing prices most of this year to keep attracting buyers who now have a wider selection of electric vehicles as more vehicle makers shift away from petrol-powered cars and trucks. The discounts range from US$4400 on Tesla’s top-selling vehicles to as much as US$20,000 on its most expensive models.

The latest round of cost-cutting trimmed Tesla’s operating margin, which represents how efficiently sales are turned into pretax profits, down to 7.6 per cent in the third quarter. That’s down from 17.2 per cent a year earlier. The measure also declined sharply in the first two quarters of this year.

In addition to lowered electric vehicle prices, increased expenses related to Tesla’s Cybertruck and the development of an AI-trained “humanoid robot” also hurt the company’s bottom line.

As usual, Tesla’s third-quarter sales consisted primarily of its Model 3 and Model Y vehicles, which have been made even more attractive by lowered prices. Despite large price cuts, sales of the ageing models S and X fell 14 per cent year over year to 15,985.

Looking ahead, the company reiterated its plans to produce around 1.8 million vehicles this year. And said its long-awaited Cybertruck is on track to begin deliveries this year.

Tesla’s shares closed 4.8 per cent lower Thursday. They were up 2 per cent in after-hours trading following the release of the earnings report.