Tesla third-quarter earnings slow, missing forecasts

Tesla reported a drop in third quarter earnings as the electric vehicle maker fell short of Wall Street expectations.

Tesla reported adjusted earnings of $2.3 billion in the quarter, or 66 cents a share, down 37% from a year earlier and the smallest profits it reported in two years. Analysts surveyed by Refinitiv had forecast a slowdown in earnings but still expected it to report earnings per share of 73 cents a share.

The company also missed on third quarter revenue of $23.4 billion, up 9% from a year earlier but short of the $24.1 billion forecast by analysts. Tesla has been repeatedly cutting the prices of its vehicles to boost sales demand in the face of growing electric vehicle competition from established automakers.

The company once again reported thinner profit margins, even if it is still more profitable than traditional automakers. Its gross margin fell to 17.9%, down 7 percentage points from a year earlier. And the more closely watched adjusted automotive margin, excluding sales from regulatory credits, fell nearly 11 percentage points to about 18%.

"Clearly not a roses and rainbows quarter for Tesla as the company missed the street across most metrics," said Dan Ives, tech analyst at Wedbush Securities and a bull on Tesla stock. "Price cuts have hurt margins and now the focus is when do the price cuts end?"

But the company said that it has had success cutting the cost of each vehicle, although it said costs are higher at its new factories in Texas and Germany than its established plants in California and China.

"We have implemented necessary upgrades in [the third quarter] to enable further unit cost reductions. We continue to believe that an industry leader needs to be a cost leader," said the company's statement.

The company said its profits and sales were both hurt as it temporarily shut several production lines for upgrades, which it said led to a sequential decline in production volumes, as well as higher interest rates, which raised the cost of ownership for many buyers.

But it said it is still on track to deliver 1.8 million vehicles for the year. That target would require its fourth quarter sales to be up 17% from what it achieved in the last three months of 2022. Tesla also said it still expects to begin delivery of the long-delayed Cybertruck pickup by the end of this year. Soon after the earnings report, Tesla CEO Elon Musk tweeted out that first deliveries of the Cybertruck are now scheduled for November 30.

Those assurances helped to support the shares of Tesla in after-hours trading, as shares were up more than 1% following the report. Shares have nearly doubled in price so far this year after losing 65% of their value in 2022.