Good morning! It is Friday, October 23, 2026, and this is The Morning Shift, your comprehensive daily roundup of the top automotive and mobility headlines from around the world. This is where you will find the most important, industry-shaping stories influencing how drivers get around the globe today.

In this morning’s edition, we examine a rough third quarter for Tesla’s bottom line and the growing chatter around a potential merger with SpaceX, a massive wave of job cuts at Volvo as the Swedish automaker fights through severe market headwinds, a sudden security-related ban on BYD vehicles at a U.S. air base in Japan, and Lexus pulling the plug on its plug-in hybrid TX crossover.

1st Gear: Tesla’s Third-Quarter Results Were Uneven at Best

Tesla experienced a remarkably unusual third quarter, balancing better-than-expected headline results against a notable contraction in core automotive revenue. The report caps off a brutal stretch for Tesla’s stock price, which has fallen nearly 15% on a year-to-date basis. In an apparent effort to invigorate investor confidence and pump up those flagging financial metrics, CEO Elon Musk floated the idea of a merger between Tesla and his private aerospace venture, SpaceX, calling it a "good idea" during an earnings call.

When questioned about the potential union during the company’s financial call, Musk offered a characteristically colorful response. "I feel like I’m tap dancing through a minefield," Musk told listeners. While he had briefly addressed the matter in his opening remarks, he declined to provide additional details, noting, "I think I said everything that should be said yesterday."

Overall revenue for Tesla dipped slightly compared to the same period a year earlier, when the company generated $28.24 billion. The core automotive division suffered a 3% year-over-year revenue decline, dropping to $20.56 billion for the quarter. Energy revenue fared even worse, falling 16% down to $2.88 billion. Conversely, Tesla’s services and other revenue streams provided a bright spot, surging 33% to reach $4.61 billion.

Tesla attributed its lackluster automotive revenue and diminished profits to lower average sales prices across its vehicle lineup during the quarter, alongside ongoing difficulties securing sufficient battery supplies to fulfill its existing backlog of orders. Net income attributable to common shareholders plummeted 29% to $787 million, or 22 cents a share, down significantly from $1.11 billion, or 32 cents a share, during the same period a year prior.

This drop in overall profitability reflects a massive surge in corporate spending directed toward humanoid robots, specifically the Optimus initiative, and other sprawling artificial intelligence projects. Capital expenditures more than doubled year-over-year to $3.73 billion. Consequently, free cash flow plunged 62% to $1.53 billion, following a quarter where Tesla’s free cash flow had turned negative.

On the software front, Tesla reported that adoption of its FSD (Supervised) system—a partially automated driving assistant sold for a monthly subscription fee of $99 in the United States—grew by 20 percentage points from the second quarter. Active FSD subscriptions surged 67% year-over-year to reach 1.74 million. Ashok Elluswamy, Tesla’s vice president of Autopilot, stated during the earnings call that the company plans to provide select customer vehicles with access to upcoming FSD (Unsupervised) systems around the second quarter of next year.

Barring regulatory intervention and rising protectionism, Musk predicted that Tesla "will end up doing a majority of all passenger miles on Earth in any country where it is allowed to operate freely."

Geographically, Tesla noted that vehicle sales in Canada, Japan, Taiwan, and Australia achieved new records during the quarter. However, the company has struggled to achieve meaningful growth in its core domestic market recently, while aggressive Chinese electric vehicle makers such as BYD and Xiaomi have captured significant market share in Asia and Europe with affordable, innovative offerings. Tesla’s momentum in the U.S. was also hampered last year by the expiration of the federal EV tax credit.

Earlier this month, Tesla announced that global vehicle sales for the third quarter hit 486,532 units, marking a roughly 2% decline compared to the previous year.

2nd Gear: Volvo Slashing Thousands of Jobs in Deep Turnaround Effort

Volvo is eliminating an additional 2,500 jobs, accounting for roughly 6% of its total global workforce, as part of an aggressive, expanded turnaround plan designed to weather ongoing turbulence, particularly in the Chinese market. The Swedish automaker, which is majority-owned by China’s Geely, stated that its operating environment remains extraordinarily difficult due to strong external challenges. Although management believes its long-term strategic vision remains intact, immediate operational adjustments are deemed necessary.

Through these workforce reductions, Volvo aims to achieve approximately $504.4 million in cost savings, compounding earlier fiscal retrenchment measures. The vast majority of the job cuts—around 2,000 positions—will take place in Sweden, executed primarily by terminating existing consultant contracts, relying on natural attrition, and offering targeted exit packages to employees.

This latest restructuring follows the conclusion of a $1.82 billion cost-saving plan last year that involved 3,000 job cuts, alongside additional savings pursued earlier this year under a separate $504.5 million cost-cutting initiative.

"With severely challenged volumes, we need to reinforce our turnaround plan with additional decisive actions, lowering our break-even point and improving cash flows to make us more resilient," Chief Executive Officer Hakan Samuelsson said.

The strategic overhaul also involves increasing the utilization of shared suppliers with Geely and engineering a more streamlined production structure centered on five dedicated Volvo manufacturing plants worldwide. Working alongside Geely, the company is actively exploring the possibility of manufacturing vehicles for other automotive brands at its factory locations in Chengdu and Ghent.

The full financial impact of these measures is projected to materialize by the end of 2027, by which point the company’s overall indirect spending is expected to sit nearly 25% below 2024 levels.

Earlier this month, Volvo withdrew its full-year guidance after warning that severe challenges in both its key Chinese and U.S. markets yielded lower-than-expected third-quarter sales and a dimmed financial outlook. Global manufacturers are currently grappling with an overcrowded Chinese auto market characterized by a surge of domestic model launches and a prolonged, intense price war.

"In China, the market for legacy premium brands is in severe decline," Samuelsson noted. "This has resulted in our revenues in China falling by almost 50% compared to last year." Company executives indicated that market conditions in China are expected to remain hostile over the next two years, necessitating rigorous cost-efficiency measures.

Concurrently, a marked recovery in the United States has remained elusive, impeded by tariffs and the expiration of federal government incentives for new electric and hybrid vehicles. Sluggish consumer sentiment and heightened competitive pressure within the lucrative SUV segment have further strained operations. "The weak performance in the U.S. and China means that half our business was not contributing to profitability," Samuelsson added.

Despite the immediate cuts, Volvo is looking toward future growth catalysts, having outlined plans for 13 new model launches by the end of the decade aimed at doubling its market share. The company also confirmed it is accelerating the development of a localized product portfolio tailored specifically for Europe, the U.S., and China.

3rd Gear: U.S. Armed Forces Ban BYD Vehicles from Air Base in Japan

The United States armed forces have implemented a strict security ban prohibiting vehicles manufactured by China’s BYD from entering an air base in Japan. The decision follows Washington’s recent inclusion of the automaker on a targeted list of companies believed to be providing support to China’s military.

The security concerns center on the deployment of onboard cameras and sophisticated sensors integrated into modern vehicles, which U.S. officials fear could potentially collect and transmit sensitive security-related intelligence from military installations.

According to reports, Kadena Air Base in Okinawa will begin turning away BYD automobiles at its gates. The restriction applies universally to vehicles operated by base personnel, military contractors, commercial entities, and visiting taxis without exception.

In June, the U.S. government added BYD—alongside e-commerce giant Alibaba, internet search provider Baidu, and EV manufacturer NIO—to a restricted list of entities designated as aiding the Chinese military. Major tech firms impacted by the designation have begun mounting legal challenges; Alibaba subsequently filed a lawsuit against the U.S. government over the classification.

Unsurprisingly, China’s foreign ministry has strongly protested the designation, characterizing the government’s actions as discriminatory and entirely unreasonable.

4th Gear: Lexus Pulls the Plug on the TX PHEV

The once-promising market segment for plug-in hybrid electric vehicles (PHEVs) continues to contract, with high-profile casualties mounting across the luxury sector. The latest model to fall victim to shifting consumer demand is the three-row Lexus TX 550h+ plug-in hybrid.

As part of a minor product refresh for the 2027 model year, Lexus is discontinuing the PHEV variant of the TX crossover. The decision aligns with consumer purchasing habits; the plug-in version of the TX accounted for a negligible 2% of the vehicle’s total sales volume this year. Moving forward, the TX lineup will survive exclusively with standard internal combustion engine configurations and a conventional hybrid powertrain.

U.S. deliveries of the plug-in hybrid TX reached 953 units through September, marking a 38% increase from the previous year. However, demand for the standard hybrid TX vastly outpaced its plug-in sibling, with deliveries rising 20% to 8,787 units over the same timeframe.

A Lexus spokesperson declined to elaborate on the specific commercial drivers behind the discontinuation, providing a standard corporate statement: "Lexus continually evaluates its powertrain offerings to best meet customer needs, regulatory requirements, and future product plans."

For the 2027 model year, both the gasoline-powered and traditional hybrid variants will continue to utilize the brand’s 2.4-liter turbocharged inline-four engine. The base setup produces 275 horsepower, while the hybrid model incorporates an electric motor and e-axles to elevate total output to 366 horsepower.

The refreshed TX will also feature a redesigned front fascia, improved steering dynamics, and the inclusion of the Lexus Safety System+ 3.0 as standard equipment across the entire trim hierarchy. Buyers will have a choice of seven distinct trim levels, with both front-wheel-drive and all-wheel-drive configurations available. Pricing is slated to start at $58,890, including destination fees, representing a modest $400 increase over the 2026 model year.