Tesla Inc.’s surprise profit in the third quarter came despite a drop of almost 40% in revenue from the U.S. -- its largest market.
The electric automaker’s U.S. sales plummeted to $3.13 billion in the latest quarter, from $5.13 billion a year earlier, according to a securities filing on Tuesday. Tesla said earlier this month global deliveries for the quarter rose a higher-than-expected 1.9% to 97,000 vehicles, though most of that growth came from sales of the Model 3 -- its lowest profit margin vehicle.
While it was known that the automaker was emphasizing global expansion last quarter, the document adds clarity to the extent of the regional shift. The U.S., China, the Netherlands and Norway have long been the biggest markets for the company’s all-electric cars. While sales in China -- the world’s largest auto market -- rose to $699 million from $409 million, a category known as “other” -- which includes several countries -- grew to $1.8 billion from $784 million.
Tesla shares fell 2.2% to $320.47 as of 12:54 p.m. New York time.
Tesla also said in the filing that it reduced costs due to manufacturing efficiencies and unspecified “commercial negotiations with suppliers.” Panasonic Corp., which makes battery cells for Tesla and is the company’s largest supplier, didn’t respond to a request for comment.
At least one analyst was unimpressed. Craig Irwin, an analyst at Roth Capital Partners, downgraded Tesla to sell from neutral over concerns that Tesla’s gross margins are unsustainable. Roth has a $249 price target on the stock.
“The filing from Tesla shows warranty adjustments and other one-time items are a large driver of perceived strength,” wrote Roth in a note Tuesday. The company got a one-time $55 million benefit in part by reversing certain warranty provisions, he said.