Latest earnings data reveals Tesla (TSLA.O) experienced a 37% drop in net profit during the third quarter, despite increased vehicle sales. This decline casts a shadow over what was otherwise a record-breaking quarter for the company.
Meanwhile, Tesla shareholders are set to vote next month on CEO Elon Musk's new compensation package, potentially worth a staggering $1 trillion. Musk emphasized the importance of this package at an investor meeting on Wednesday, stating it would grant him an additional 12% equity stake over the next decade to ensure his continued control as the company expands into AI and humanoid robotics with Optimus.
"I have a fundamental concern about my Tesla voting control: if I built a massive robot 'army', is it possible I could be overthrown in the future?" he questioned.
"If I don't have at least some level of influence over it, I'm not comfortable building that robot army."
He also highlighted Tesla's progress in full self-driving software, including plans to remove safety drivers from its Austin robotaxis by the end of the year. Musk indicated that Tesla's new Cybercab, a self-driving two-seater without a steering wheel or pedals, is expected to enter production in the second quarter of next year.
"This car will feel like it's alive. That's the level that AI will reach," he added. "I'm even wondering how much intelligence a car should have, it might actually get bored."
During the earnings call, Tesla gave limited attention to its electric vehicle business, despite it being the primary driver behind the company's record-breaking $28 billion in Q3 revenue, a 12% year-over-year increase. Tesla also reported a record $4 billion in free cash flow.
Part of the revenue growth was attributed to record vehicle sales, as US consumers rushed to purchase vehicles before the $7,500 federal electric vehicle tax credit expired on September 30th. Tesla's energy generation and storage business also grew by 44%, with record battery deployments.
Tesla's Q3 net profit totaled $1.4 billion, down from $2.2 billion last year. The company attributed the profit decline to increased R&D spending in areas like AI, as well as a 44% decrease in carbon credit revenue to $417 million.
Tesla's stock fell more than 3% in after-hours trading following the report's release.
Whether Tesla can maintain its sales momentum in the coming months remains to be seen. As Musk shifts his focus towards expanding AI capabilities, the company faces multiple challenges, including increased competition in the EV market, aging models, and reduced government subsidies.
Musk warned in late July that Tesla "might experience a couple of tough quarters." He stated on an investor call that Tesla is at a crucial turning point in the field of AI, and that many people don't realize how quickly self-driving vehicles will proliferate, "frankly, it's going to be like a shockwave.""
Tesla shareholders will vote on Musk's new compensation package at the annual shareholder meeting on November 6th. The Tesla board believes the expensive package is intended to ensure Musk remains invested in the company, maintaining leadership as the company gradually transitions from an electric vehicle manufacturer to an AI-driven enterprise.
Musk currently owns approximately 15% of the company. He previously stated that if his voting rights at Tesla fall below 25%, he would prefer to pursue his AI projects outside of the company. Last week, he threatened via his X platform to leave Tesla if the compensation package is not approved.
It remains unclear whether Tesla will be able to continue expanding its automotive business without government support after US electric vehicle tax credits expired last month.
The company's financial situation has deteriorated sharply since Musk publicly engaged in partisan politics last year, leading to protests and reputational damage in former core markets such as California and Europe. In the first half of this year, Tesla vehicle sales fell by more than 13%, net profit plummeted 71% in the first quarter, and another 16% in the second quarter. As competition intensifies among global automakers, Tesla's market share continues to erode.
Investors are also dissatisfied with its aging vehicle lineup. Despite years of continuous promotion of the upcoming low-priced new car, Tesla only revealed stripped-down versions of the Model Y SUV and Model 3 sedan earlier this month. These new models removed features such as the rear-seat screen and FM radio, and are $5,000 cheaper than other versions, but even so, the price after tax subsidies is still higher than the previous more complete models.
On Wednesday, the National Highway Traffic Safety Administration announced that Tesla would recall approximately 13,000 vehicles due to a battery issue that could cause the vehicle to stall. The recall involves 2025 Model 3 and 2026 Model Y vehicles.
Tesla launched a Robotaxi ride-hailing application this summer in Austin, Texas, currently staffed with a safety officer in the front passenger seat; in the San Francisco Bay Area, a safety officer sits in the driver's seat. Ride services in both locations are subject to a waitlist system.
Musk said the company intends to slow the pace of service expansion. "Even if there is a single accident, it will make global headlines," he added.
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