Tesla recently unveiled its financial results for the second quarter of 2026.

The data reveals that Tesla sold 480,100 vehicles in Q2, marking a 25% year-on-year surge and setting a new record for the same period in the company’s history—a remarkable feat.

In terms of revenue, the income for this quarter soared to $28.236 billion (approximately RMB 191.2 billion), a 26% increase, with automotive revenue reaching $20.516 billion, up by 23%. On the surface, the figures appear promising.

However, despite the increase in car sales and revenue, profits have taken a significant hit. The operating profit for the second quarter stood at just $398 million (approximately RMB 2.7 billion), a staggering 57% year-on-year decline. Meanwhile, the operating profit margin dwindled from 4.1% in the same period last year to a mere 1.4%.

Concurrently, the automotive gross margin dipped from 17.2% in the same period last year to 16.9%, and the average selling price of cars also witnessed a decline.

The detailed data is illustrated in the figure below. As evident, while revenue has climbed, nearly all other performance indicators have trended downward.

Why, despite the surge in car sales and revenue, have gross margins, operating profits, and net profits all plummeted? This can be attributed to the ongoing price war in the automotive industry.

The Chinese market has long been a crucial battleground for Tesla, and it is currently embroiled in a fierce price war. A plethora of new models are constantly hitting the market, all vying for a piece of Tesla’s pie, such as the Xiaomi SU7 and YU7.

Compared to Tesla, these models boast high competitiveness, and generally, domestically produced cars come with a lower price tag. Consequently, Tesla dares not raise prices and, to stay competitive in the price war, has been compelled to introduce a slew of preferential policies, such as 5-year interest-free financing and frequent discounts. Without these measures, selling its cars would become an arduous task.

As a result, although Tesla’s car sales have risen, the average price of its cars has dropped. Moreover, due to the intense competition, Tesla must continually invest in R&D, leading to escalated R&D expenditures. Ultimately, this is mirrored in the profits, which have plummeted by 57%.

Thus, even if you’re not a fan of domestically produced cars and still have your heart set on a Tesla, you should express gratitude to domestic carmakers. Thanks to their competition and price wars, you can now snag a Tesla at a more affordable price. This is also a testament to the prowess of domestic carmakers. What’s your take on this?

In light of the price war in the automotive industry, Tesla is now undergoing strategic business adjustments. It aims to boost revenue and profits through FSD paying users and the accelerated rollout of Robotaxi services, relying less on car sales. As for the outcomes, we’ll just have to wait and see.