Tesla ended the year under financial pressure after its profits dropped sharply in the final quarter, reflecting weaker vehicle sales, rising costs and heavy spending on future technology. The electric car maker said the decline came as it poured more money into artificial intelligence, even as competition in the global market intensified.
The company announced on Wednesday that its fourth-quarter profits fell by 61 percent, dropping to Sh108.36 billion in the three months ending December 31. This was down from Sh270.9 billion recorded during the same period a year earlier.
Tesla’s revenues also declined, falling 3.1 percent to Sh3.2121 trillion. The company said the drop was driven by softer demand for vehicles alongside higher operating expenses.
Founded in 2003 by Martin Eberhard and Marc Tarpenning, Tesla has grown into one of the most influential electric vehicle and clean energy companies in the world. Headquartered in Palo Alto, California, the company transformed the auto industry by pushing electric cars into the mainstream through models such as the Model S, Model 3, Model X and Model Y.
Under the leadership of chief executive Elon Musk, Tesla has expanded beyond vehicles into energy storage and solar products, with the stated goal of accelerating the global shift to sustainable energy. Its work in battery systems and self-driving technology has placed it at the center of the move toward cleaner transport.
The latest results conclude a difficult year for the company. Tesla has faced rising competition from other electric vehicle makers, higher costs across its operations, and political controversy linked to Musk’s public positions.
Lower earnings had been widely expected after the company disclosed earlier in January that both fourth-quarter and full-year vehicle deliveries had declined. Total auto sales for 2025 fell by nine percent, which Tesla blamed on tougher competition and changing consumer demand.
In a presentation released alongside the earnings, the company listed several factors that weighed on performance. These included higher restructuring costs, increased spending on research and development, especially in artificial intelligence, and the effect of higher tariffs.
Tesla also reported a fall in revenue from emission tax credits following changes to environmental rules in the United States.
Speaking during a call with investors, Musk defended the company’s direction and acknowledged the scale of current spending. He said Tesla was making “very, very big investments” to secure a future where technology delivers abundance, a strong environment and improved quality of life.
The company’s chief financial officer, Vaibhav Taneja, said Tesla plans to sharply raise capital spending. He revealed that the company’s 2026 investment budget would exceed Sh2.58 trillion.
That amount would be more than double the Sh1.0965 trillion spent the previous year, underlining how central long-term technology projects have become to Tesla’s plans.
Musk also announced that Tesla intends to phase out production of its Model S and Model X luxury vehicles. He said factory space at the Fremont, California plant would instead be converted to produce humanoid robots, signaling a shift away from traditional car manufacturing.
Tesla did not issue a forecast for vehicle sales in 2026, saying results would depend in part on overall demand. The lack of guidance marked a cautious turn after earlier expectations of renewed growth.
In its January 2025 earnings update, the company had predicted a recovery in vehicle sales. That rebound failed to materialize as deliveries continued to fall, weighed down by competition from global rivals and political backlash tied to Musk’s alliances and public statements.
Despite the weak results, Tesla’s shares climbed sharply in the second half of 2025 after Musk exited the White House. Many investors continued to focus on the company’s long-term plans rather than short-term profits.
Musk has repeatedly argued that Tesla’s future lies in its edge in artificial intelligence and self-driving systems. He has described these technologies as key advantages over competitors and a reason for the company’s high market value.
Tesla has echoed this view, saying it is shifting from being mainly a hardware business to becoming a physical artificial intelligence company. For now, that shift is proving costly, with profits falling as spending rises.
The latest figures show that while Tesla remains committed to its long-term vision, the path toward its promised future of abundance is likely to be expensive and uncertain.
