Tesla stock falls 3% after EV inventory glut cleared

Tesla stock dropped more than 3% on Oct. 22, a day after CEO Elon Musk told investors the company had cleared a record glut of unsold vehicles. By the closing bell, Tesla stock was down 3.08% at more than $374 a share on the Nasdaq, even as Musk said Tesla sold more vehicles than it produced for a second straight quarter.

The drop in Tesla stock came despite Musk touting the elimination of the glut of 50,326 unsold vehicles Tesla reported in the first quarter of 2026, when it produced 408,386 electric cars and sold 358,023. "So the third quarter was very strong, and I'd like to give a big congratulations to the whole Tesla team for working hard to make it happen," Musk said on the Oct. 21 call with investors. "Demand is growing rapidly for our vehicles. It's exceeding our production by a significant margin."

Tesla reported sales of 1,324,681 electric cars in the first nine months of 2026. The company ended the quarter with the largest backlog for its passenger vehicles in four years, Musk said. "Obviously, we're going to be ramping and we are ramping production meaningfully," he added.

Tesla stock and the Q3 earnings report

Tesla's Q3 earnings report showed more than $28 billion in revenue and adjusted earnings per share of $0.48 for the first nine months of 2026, close to analyst projections of $28 billion in revenue and $0.45 per share. The numbers landed near expectations, but Tesla stock still slid the next day. "We continued our progress on a lot of fronts in Q3," chief financial officer Vaibhav Taneja said on the investor call.

Musk also used the Q3 earnings call to talk up the two-seat Cybercab and the expansion of Tesla's Robotaxi service. He said the Cybercab fleet in Austin has grown by a factor of 10 since its launch about a month ago, and that Tesla's robotaxis have driven more than 3 million autonomous miles. The service now runs in Austin, Dallas, Houston, Tampa, Orlando and Miami, with plans to add Phoenix, Las Vegas, San Antonio and Jacksonville.

Why Tesla stock fell despite the sales milestone

The selling in Tesla stock reflects a year in which the company's American sales have lagged. Tesla sold 589,160 cars in the United States in 2025, down 7% from 633,762 in 2024. Industry analysts have pointed to Elon Musk's political activity in 2025, including his work with President Donald Trump, as a drag on sales. Musk has since left the Trump administration and kept a lower political profile. Clearing the EV inventory overhang marks a turnaround from the record glut that weighed on the company early in the year.

Broader demand for electric vehicles has also cooled. Electric vehicles made up 6.4% of new car sales in the United States in the third quarter of 2026, up from 5.8% in the second quarter but down from 10.5% a year earlier, according to Cox Automotive. The year-ago quarter was the last in which buyers could claim $7,500 in federal EV tax credits. Tesla faces growing competition from rival automakers introducing new models, even as some pull back amid weaker EV demand and the end of federal support. Bringing its EV inventory back in line with demand took two straight quarters of selling more cars than it built.

Elon Musk declined to discuss rumors of a potential merger between Tesla and SpaceX on the call. "With regard to a potential merger with SpaceX, I think I said everything that should be said yesterday," he said. Barron's has reported that a combination could become the biggest merger in history. Tesla stock ended lower on Oct. 22 despite the sales milestone, as investors weighed weaker American demand against Musk's autonomy promises. Tesla's annual meeting is scheduled for Dec. 3.