Tesla sees its profits sink by 37% due to rising costs… despite the record of deliveries until September

Tesla is chaining its fourth consecutive quarter of decline in its net profit. Between July and September, the electric car manufacturer based in Austin (Texas, United States) saw its net profits decrease by 37% to 1,373 million dollarsjust over 1,182 million euros at the current exchange rate, due to the increase in operating expenses and the decrease in income from regulatory credits.

The significance of this cut in profits is that it occurs in a context in which the company founded by Elon Musk saw its total income grow by 12% to 28,095 million dollars (about 24,198 million euros) thanks to the vehicle delivery recordwhich totaled 497,000 units, and energy storage deployments. Among the reasons for the increase in costs are the rise in component prices, but also high investments in artificial intelligence, robotics and its new lines of business.

Between January and September, the company reduced its net profit by 40% to 2,954 million dollars (2,543 million euros), compared to the 4,963 million registered in the first nine months of the previous year. In that same period, total income amounted to 69,926 million dollars (60,210 million euros), almost 5% less in year-on-year terms. The operating result stood at 1,624 million dollars, with a 40% year-on-year cut.

Record deliveries… but fewer tax credits

The record of car deliveries gives some respite to the company that, throughout the first part of the year, was affected by boycotts as a result of Musk’s relations with the White House. However, analysts fear that part of this increase has to do with the anticipation effectgiven the upcoming expiration of the tax credit for electric vehicles in the United States, which occurred at the end of September. This raises uncertainties for the next quarter.

Experts also remember that regulatory credits have represented a significant part of Tesla’s profits in several quarters, as happened especially between the years 2019 and 2022, and that without them the electric vehicle manufacturer would have had smaller profits or even losses in certain periods.

Regulatory credits (or regulatory credits) are environmental incentives that governments grant to automakers that produce electric or low-emission vehicles. Companies that fail to meet emissions targets—like most companies that produce gasoline or diesel vehicles—must purchase these credits from other manufacturers to comply with regulations and avoid penalties.

Since Tesla is a 100% electric vehicle producer, it accumulates more credits than it needs and sells them to other manufacturers (as is the case of Stellantis, General Motors or Honda). These are, therefore, income that do not come from the sale of cars, but from these regulatory transactions.