Tesla(US:TSLA) The Motley Fool·2025-12-15 13:30Core Viewpoint - Tesla may be facing a net loss in Q4 2025, with indications that the company is already unprofitable due to declining automotive sales and increasing operating expenses [1][12]. Automotive Sales Performance - Tesla's automotive revenue has declined year over year in both Q1 and Q2 of 2025, marking the first time since 2012 that the company has experienced two consecutive quarters of revenue declines [3]. - Despite a record Q3 automotive revenue of $21.2 billion, this was largely driven by the expiration of the $7,500 U.S. federal electric vehicle tax credit, which incentivized purchases in that quarter [3]. Industry Trends - Other automakers have reported significant declines in EV sales for November, with Ford down 60.8%, Hyundai down 58.8%, Kia down 62%, and Honda down 88.6% [4]. - If Tesla's vehicle sales decline by 50% year over year in Q4, automotive revenue could drop to approximately $9.9 billion, contributing to an overall revenue decline of about 10% to $17.9 billion [5]. Pricing and Revenue Impact - Tesla has introduced cheaper "Standard" versions of its Model 3 and Model Y, which are priced about $5,000 lower than their counterparts, potentially reducing revenue by over $1 billion if these models dominate sales [6][7]. - Even with a conservative estimate that only half of the sales will be the Standard versions, the revenue could still decrease by $600 million, leading to a total of $17.3 billion for Q4 [7]. Margin Analysis - Tesla's gross margin has been on a decline, peaking at 29.1% in Q1 2022 and falling to 18% in Q3 2025 [8]. - If the trend continues, the Q4 gross margin could drop to 17.2%, resulting in a gross profit of just under $3 billion based on the estimated revenue [9]. Operating Expenses - Operating expenses have increased significantly, totaling $3.4 billion in Q3, driven by SG&A, AI, and R&D projects [11]. - If operating expenses remain flat at $3.4 billion in Q4, they would exceed the gross profit estimate, leading to a potential operating loss of $400 million [12]. Optimistic Scenarios - Even under optimistic assumptions, such as lower EV sales decline and stable operating expenses, Tesla appears unprofitable for Q4 [13]. - If any optimistic assumptions fail, such as a larger decline in EV sales or increased R&D spending, the net loss could be significantly higher [14]. Future Outlook - There is a possibility that Tesla could report a smaller decline in sales or unexpected growth in non-automotive revenue, but the expectation is that Elon Musk will need to acknowledge the company's unprofitability during the Q4 earnings call [15].