is transportation editor with 10+ years of experience who covers EVs, public transportation, and aviation. His work has appeared in The New York Daily News and City & State.
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Tesla reported a profitable third quarter today, as shoppers scrambled to snatch up the company’s EVs in record numbers before the federal EV tax credit expired.
Tesla said it earned $1.4 billion in net income on $28.1 billion in revenue in the quarter that ended in September. That’s 12 percent increase in revenue but a 37 percent decrease in profits over the third quarter of 2024, when the company earned $2.2 billion in net income on $25.2 billion in revenue. Tesla’s revenue came in above Wall Street expectations of $26.24 billion, according to data compiled by LSEG.
Tesla’s operating income rebounded to $1.6 billion, with a quarter of that income coming from the sale of regulatory credits to other automakers. The company said it sold $417 million in regulatory credits, a 44 percent decrease year over year. That income, though, is expected to vanish in due course after the passage of President Trump’s budget bill, which eliminated penalties for automakers who exceed emission standards.
Tesla’s cash pile increased by 24 percent in Q3 to $41.6 billion, and free cash flow (or the amount of cash the company has generated after accounting for its day-to-day operating expenses and capital expenditures) was at just $3.9 billion.
Tesla Model Y electric vehicles (EV) at a dealership in Colma, California, US, on Tuesday, July 1, 2025. Bloomberg via Getty Images
The company’s gross margins were in the spotlight again, as bullish investors hoped to see improvements after months of steady decline. The company reported 18 percent gross margins based on generally accepted accounting practices, slightly more than the 17.2 percent reported last quarter but down from the 19.8 percent it reported in Q3 2024.
Tesla was widely expected to have a relatively good quarter as a result of the expiration of the $7,500 federal EV tax credit on September 30th. The company sold a record number of EVs in the third quarter, delivering a total of 497,099 vehicles, a 7.4 percent increase compared to the third quarter of 2024. Tesla also sold around 50,000 more vehicles than it produced, helping reduce the extra inventory that’s been building up for the first half of the year.
But this is likely to be a rare positive quarter in an otherwise dour year for Tesla. The company reported its first year-over-year sales drop in 2024 and is expected to do the same at the end of this year, with analysts predicting an 8.5 percent decline. In addition to an aging lineup of vehicles, Tesla is also facing stiffer competition in all major markets than it ever has before. And Elon Musk’s far-right political rhetoric, and his donations and work for the Trump administration, have repelled many of the company’s liberal customers.
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