U.S.-based electric vehicle (EV) maker Tesla reported a net income of $2.3 billion in the third quarter (Q3) of the financial year (FY) 2023, a 36% year-over-year (YoY) decline.

The decrease is primarily attributed to deliberate price reductions of EVs aimed at stimulating sales, which, although successful in boosting sales volumes, also eroded the company’s profit margins. Additionally, elevated operating expenses, driven by projects such as the Cybertruck, advancements in artificial intelligence, and various other research and development initiatives, further contributed to the decline in net income.

However, the company posted a 9% YoY growth in revenue at $23.4 billion for the July-September quarter. Tesla attributed it to increased vehicle deliveries and other business parts, including energy storage.

Tesla’s adjusted Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) fell by 24% YoY to $3.7 billion in the third quarter.

Electric Vehicles

Revenue from the automobile segment saw an increase of 5% YoY to $19.6 billion.

The cumulative vehicle production increased by 18% YoY to 430,488 in Q3 2023, while it decreased quarter over quarter from 479,700 vehicles.

The vehicle deliveries for the April-June quarter increased by 27% YoY to 435,059.

During the quarter, Tesla temporarily halted several production lines at multiple factories for necessary upgrades, resulting in a sequential reduction in production volumes. According to the company, these efforts to optimize delivery rates improved progressively throughout the quarter, with September representing approximately 40% of total Q3 deliveries.

At its Texas gigafactory, the company initiated pilot production of the Cybertruck and is proceeding as scheduled for its first deliveries later this year. The production rate for the Model Y in Texas is anticipated to gradually increase from its existing level as they methodically scale up additional supply chain requirements cost-effectively.

The company said that Model Y remained the best-selling vehicle in Europe year-to-date. Similar to Texas, further production ramp of Model Y will be gradual at the Berlin-Brandenburg facility.

Energy Storage

Energy storage deployments increased by 90% YoY in Q3 to 4 GWh, Tesla’s highest quarterly deployment ever. Continued growth in deployments was driven by the ongoing ramp of the Megafactory in Lathrop toward full capacity of 40 GWh with the phase two expansion. Production rate improved further quarter over quarter in Q3.

Tesla accumulated $1.5 billion of the total revenue from the energy generation and storage business during Q3, up 40% YoY.

“Regarding energy storage, we deployed 4 GWh of energy of storage products in Q3. And as this business grows, the energy division is becoming our highest-margin business. Energy and service now contribute over $500 million to quarterly profit,” said Elon Musk, CEO of Tesla, during the earnings call.

In May this year, the company started the construction of its 50 GWh in-house lithium refinery in the greater Corpus Christi region of Texas, representing an investment of over $1 billion.

Solar

Solar deployments by Tesla declined by 48% YoY to 49 MW during the third quarter. Sustained high interest rates and the end of net metering in California have created downward pressure on solar demand.

The company reported a net income of $2.7 billion in Q2 2023, a 20% YoY increase due to increased vehicle deliveries and other business parts, including energy storage and solar project deployments.