Tesla profits dip as it invests in factory upgrades and AI development

Tesla continues to see its margins fall due to price cuts. Today, the company reported earnings of $1.9 billion in net income on $23.4 billion in revenue for the third quarter of 2023. The figures represent a small increase in revenue, from $21.4 billion in the same time from last year, but a big drop in profits, falling from $3.3 billion with almost the same amount of revenue.

Tesla pointed his finger in several directions. For one thing, production was reduced as the company upgraded its factories, causing a big drop in deliveries. The company also says it is investing heavily in AI and has “commissioned one of the world’s largest supercomputers,” doubling its computing capacity since last quarter.

Still, the drop in quarterly revenue was another disappointing turn for the company after Tesla’s third-quarter delivery and production numbers fell short of expectations. Tesla had warned that planned closures of its Austin, Texas, and Shanghai factories for upgrades would result in lower vehicle production and delivery. But even the most optimistic investors were wringing their hands at the smaller numbers.

On top of everything, there are persistent chatter about Tesla’s profit margins, why they are so low, how much they can go down, and more. He will recall that Tesla used to have historic profit margins, sometimes as high as 20 percent, which is virtually unheard of in the auto industry. But rampant price cuts (good for consumers!) have caused Tesla’s once-vaunted margins to fall into mundane territory (bad for investors). Hence the hand wringing.

So, as you can imagine, things are not exactly well in the House of Musk. Cybertruck delayed! Shrinking profit margins! And the ongoing sideshow at X/Twitter, which has obviously shed an unfavorable light on Musk’s reputation and acumen as a supposed business genius.

Many of Tesla’s boosters have portrayed the current autoworkers’ strike as a unique opportunity given its non-union workforce. But it’s a bit reductionist, and Tesla’s lackluster quarter could make some of those predictions look flimsy. By most metrics, the company is still doing very well: It controls about 60 percent of the electric vehicle market. Demand is high and Tesla is taking advantage by cutting, cutting, cutting. But Tesla is not immune to broader disruptions that undermine the industry-wide shift toward electric vehicles.