Tariffs hit Tesla hard, profit falls 37% in Q3

October 23, 2025 (MLN): Tesla Inc. (NASDAQ: TSLA) reported a sharp 37% year-on-year decline in third-quarter profit on Wednesday, as the electric vehicle giant faced mounting costs from tariffs, restructuring, and research spending that offset gains from increased auto sales.

The Elon Musk-led automaker posted net earnings of $1.4bn for the quarter, down from $2.2bn in the same period last year, falling short of Wall Street expectations. Executives cited more than $400m in tariff-related expenses, alongside higher restructuring charges and a decline in revenue from regulatory credits.

Revenue, however, climbed 12% to $28.1bn, supported by a rise in electric vehicle deliveries before the September 30 expiration of a U.S. federal EV tax credit, which prompted buyers to accelerate purchases. Operating expenses surged 50% to $3.4bn, largely due to increased investments in research and development.

“Tesla faces near-term uncertainty from shifting trade, tariff, and fiscal policy,” the company said in a statement. “However, we are making strategic investments that will deliver incredible value for Tesla and the world across transport, energy, and robotics.”

In early October, Tesla rolled out two new “standard” models at lower price points, a move analysts say could help maintain momentum in the short term. However, major banks remain cautious about sustained demand.

JPMorgan analysts noted that Tesla’s next major growth phase will likely hinge on a new vehicle launch expected in the first quarter of 2026, while Wedbush’s Dan Ives emphasized Musk’s advances in autonomous driving, robotics, and artificial intelligence as the next frontier.

“The most important chapter in Tesla’s growth story is now beginning with the AI era,” Ives said, forecasting that autonomous technologies could add $1tr to Tesla’s market valuation.

Tesla’s upcoming annual shareholder meeting on November 6 will include a vote on a record-breaking compensation package for Musk that could exceed $1tr, potentially increasing his ownership to over 25% of the company if key performance milestones are achieved.

“It’s not like I’m going to go spend the money,” Musk said during a conference call. “I just want to ensure strong influence as we build the robot army.”

Tesla shares have rebounded in recent months after steep declines earlier this year, when Musk faced backlash over his political involvement during his stint in the Trump administration. Despite recent gains, shares fell 3.2% in after-hours trading following Wednesday’s earnings release.

U.S. Tesla sales saw a temporary lift from the federal EV tax credit deadline, though analysts warn of a potential sales slowdown in Q4. Meanwhile, European and U.S. markets have faced lingering weakness due to consumer boycotts and vandalism incidents.

Musk has kept a lower political profile since leaving Washington in May but reignited controversy this week after clashing with NASA Administrator Sean Duffy, who suggested SpaceX was behind schedule for a planned lunar mission. Musk fired back on X, calling Duffy “Sean Dummy” and accusing him of trying to “kill NASA.”

Despite the turbulence, investors remain focused on Tesla’s AI-driven transformation and the 2026 vehicle launch, which analysts say could determine whether the automaker regains its growth trajectory.

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