Tesla’s Promises Outrun Its Margins as Musk Doubles Down on Autonomy
Following the publication of the quarterly report, Tesla stock slightly dipped, but quickly recovered. ES futures completely mirrored the move, reflecting investor caution in the technology sector. Amid slowing global demand for electric vehicles and rising innovation costs, the market is once again asking: Where does Tesla’s business scaling end — and where does the next wave of Elon Musk’s promises begin?
Tesla’s total revenue increased by 12% to $28 billion, with electric vehicles sales accounting for $21.2 billion, a 6% increase. While these figures indicate growth, net profit fell by 37% to $1.37 billion, operating profit declined by 40% to $1.62 billion, and expenses increased by 50%. The margin has nearly halved, dropping from 11.2% to 5.8%. Despite this, the company maintains a stable financial position with $41.6 billion in liquid assets and a 46% increase in free cash flow. However, the trend points to a structural contraction in profitability in the automotive segment.
Tesla remains the world’s largest electric vehicle manufacturer, but total third-quarter output fell by 5% to 447,450 vehicles. Most sales continue to come from Model Y and Model 3, while other models — including the expensive S/X and the controversial Cybertruck — are losing market appeal. Though supply volumes rose by 7% YoY, this was due to the temporary boost from U.S. subsidies and inventory clearance rather than genuine demand growth.
All this prompts Tesla to shift its focus from traditional automaking to a software-driven narrative. Musk has again relied on the Cybercab robotaxi project and the Optimus humanoid robot, which he believes will become the main growth drivers over the next two years. The company expects to reach an annual production of 3 million cars within 24 months. Still, without significant progress in Full Self-Driving (FSD) technology and steady demand from China and Europe, this target appears overly optimistic.
The technological basis of the autopilot project remains the main challenge. In 2016, Tesla announced that all cars produced thereafter were designed for full autonomy. Nine years later, reports no longer use this phrasing; instead, they claim that all vehicles are designed with autonomy in mind. Over this time, four generations of hardware platforms have been developed, with each iteration accompanied by promises, lawsuits, and software restrictions.
Tesla has not yet offered a technically simple solution for upgrading older cars to newer generations, and the generation gap has already become insurmountable. Although Musk recently confirmed that Samsung and TSMC will take over the production of the latest AI5 chips in the U.S., this does not eliminate the question about the feasibility of deploying Full Self-Driving (FSD) technology on the ambitious scale the company has projected.
Nevertheless, Musk continues to make bold predictions, asserting confidence in achieving fully autonomous driving technology that surpasses human safety. He also views Optimus robots as future surgeons and a tool for combating poverty, emphasizing that he intends to maintain control of Tesla to ensure he can direct this new robotic frontier.