Profits plummet by 44% after sizable price cuts

Tesla’s profit slumped in the third quarter after the carmaker cut prices to maintain its dominance of the market for electric vehicles.

The company reported a net profit of $1.9 billion from July through September, below Wall Street expectations. That was a 44% drop from the $3.3 billion Tesla made in the same threemonth period a year earlier.

The company has slashed prices by around 25% in the United States during the last year, putting the priority on sales rather than profit. The least expensive version of Tesla’s bestselling car, the Model Y sport utility vehicle, now starts at $44,000 before government incentives, or roughly as much as the comparable Toyota RAV4 Prime plug-in hybrid, which has an electric motor and a gasoline engine.

“We continue to believe that an industry leader needs to be a cost leader,” Tesla said in a statement.

Despite the cuts, Tesla’s share of the electric vehicle market in the United States slumped to 50% in the third quarter from 60% in the first quarter, according to Kelley Blue Book. BMW, Mercedes, Hyundai, General Motors and other automakers have been introducing new electric vehicles at a rapid clip, eroding Tesla’s dominance.

Tesla is also facing stiffer competition in China and Europe, two large markets for batterypowered cars, from local automakers.

Analysts had expected a decline in profit after Tesla said this month that sales fell in the third quarter because of temporary factory shutdowns to retool assembly lines at factories in Austin, Texas, and Shanghai. But the slump was greater than expected.

At least until recently, Tesla was more profitable than established U. S. automakers, allowing it to cut prices. “I view it as a way to defend market share at the expense of margin,” said Kevin Roberts, director of industry insights and analytics at Cargurus, an online auto sales site.

The company may not be able to continue cutting prices indefinitely. Its net profit margin in the third quarter was 8%, in line with that of traditional carmakers.

Investors are hoping that the Cybertruck pickup will revive sales. The company said Wednesday that it expected to begin deliveries of the vehicle on Nov. 30, two years behind schedule.

But Ford Motor, Rivian and GM have reported lackluster sales of electric pickup trucks, suggesting that the market for such vehicles may not be quite as big as industry executives and analysts had once thought. This week, GM said it would delay by a year plans to start producing electric pickups at a factory in Michigan, and Ford said it was slowing production of its F-150 Lightning truck.

Still, Tesla could benefit if the United Auto Workers strike against Ford, GM and Stellantis expands to more factories. So far, workers at six plants owned by the three companies have walked off the job. Tesla workers do not belong to a union.