Tesla's 3rd quarter net income drops 44% due to lower prices

Tesla's third-quarter net income dipped compared to the previous year, as price reductions drove robust sales growth but also compressed the company's profit margins.

The electric vehicle, solar panel, and battery manufacturer based in Austin, Texas, disclosed a net income of $1.85 billion for the July-September quarter, marking a 44% decrease from the same period the previous year. Earnings per share declined from 95 cents to 53 cents.

Also read/watch - IMF downgrades China's growth forecast, predicts GDP decline

Excluding stock-based compensation, Tesla's adjusted net income stood at $2.32 billion, or 66 cents per share. On this basis, Tesla's earnings fell short of the consensus estimate of 73 cents per share, according to FactSet.

Total revenue increased by 9% to $23.35 billion, though analysts had anticipated $24.19 billion.

In earlier reports, the company stated it sold 435,059 vehicles during the July-September period, marking a 27% rise from the previous year. However, these deliveries fell short of the 461,000 vehicles analysts had predicted for the quarter, according to FactSet Research. Tesla attributed this shortfall to planned factory upgrades.

Also read/watch - India will become world's 3rd largest economy by 2027: JP Morgan's James Sullivan

Throughout the year, Tesla has continually reduced prices to attract buyers in the increasingly competitive electric vehicle market. Discounts have ranged from $4,400 on its popular models to as much as $20,000 on its high-end vehicles.

These price reductions impacted Tesla's operating margin, which measures the efficiency of turning sales into pre-tax profits. The operating margin declined to 7.6% in the third quarter, down from 17.2% the previous year. This metric also showed significant declines in the first two quarters of the year.

In the third quarter, Tesla primarily sold its Model 3 and Model Y vehicles, which gained attractiveness due to their lowered prices. However, sales of the older Model S and Model X models dropped by 14% year-over-year to 15,985.

Following the earnings report, Tesla's shares closed 4.8% lower, but they rose by 2% in after-hours trading.