Updated Oct 18, 2023 - Economy

Tesla profit hurt by price cuts and increased AI spending

Tesla cars sit parked at a Tesla store Wednesday in Corte Madera, California. Photo: Justin Sullivan/Getty Images

Tesla fell short of expectations on its third-quarter profit and revenue as price cuts and increased investments off set higher vehicle sales.

Why it matters: As competition ramps up, Tesla cut prices about 25% in the third quarter, compared to the same period a year earlier, according to Cox Automotive's Kelley Blue Book.

Driving the news: Tesla on Wednesday posted third-quarter revenue of $23.35 billion, up 8.8% from a year earlier but short of S&P Capital IQ expectations of $24.1 billion.

  • The company recorded net income of $1.85 billion, missing estimates of $2.2 billion.

The big picture: The electric vehicle maker said its reduced prices and increased operating expenses from launching production of the Cybertruck and increased AI spending hurt the bottom line.

  • For the period, Tesla delivered 435,059 vehicles, up 27% from a year earlier.
  • The company reported gross profit margin of 17.9%, missing S&P expectations of 18.5%.

Zoom in: Tesla said it plans to begin deliveries on the Cybertruck later this year, though CEO Elon Musk warned that it won't be profitable right away.

  • "I do want to emphasize that there will be enormous challenges in reaching volume production with the Cybertruck and then in making the Cybertruck cash flow positive," he said on an earnings call, though he added that "demand is off the charts."

Musk noted that the company is making progress on the development of its humanoid robot, Optimus.

  • "Optimus a year ago could barely walk and now it can do yoga," he said. "A few years from now it can probably do ballet."

What to watch: Investors are awaiting word on a new vehicle line from Tesla.

  • Tesla said in a presentation that "we continue to make progress on our next generation platform."

Go deeper... Tesla Inside: How Elon Musk could control more of the EV industry

Editor's note: Cox Automotive owner Cox Enterprises owns Axios. This story was updated with comment from Musk.

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