Tesla Q3: Price Cuts, China Demand and FSD Attach — Margin Squeeze or the Start of a Volume-Led Turnaround?
Tesla returned to top-line growth in the third quarter even as profitability remained under pressure, underscoring a pivotal strategic question for investors: Are price cuts and incentives merely compressing margins, or are they seeding a durable, volume-led recovery as energy scales and autonomy inches forward? The company delivered a record quarter for vehicle deliveries and accelerated its energy business, but missed on earnings, reported sharply lower regulatory credit revenue, and acknowledged meaningful cost headwinds. The result is a mixed but decipherable picture. U.S. demand benefited from a rush to capture federal EV incentives before they expired at the end of September, likely pulling sales forward and creating a fourth-quarter air pocket. China showed signs of life—helped by new variants and heavier incentives—while Europe remained a soft spot amid intensified competition and brand challenges. Meanwhile, Full Self-Driving attach improved but remains a small contributor to revenue today, and the energy segment has become a meaningful, tangible growth engine. This article unpacks the quarter and maps two competing paths for the next leg: a volume-led turnaround versus persistent margin pressure.