MILAN Stellantis head Carlos Tavares said on Wednesday that the profitability of Tesla was declining as the rival U.S. automaker entered the real world of manufacturing and competition.

"They are entering my world, the world of tight pricing, cost competitiveness, and the operational issues that a big company like ours may face," Tavares told the press, presenting first half results for the Franco-Italian automaker.

"The result of the fact that Tesla is now entering my world, is that their profitability moved from more than 17% in the first half of 2022 to 10.5% in the first half of 2023," he said.

"They were more profitable than Stellantis, now they are less profitable than Stellantis".

Earlier on Wednesday Stellantis, the world's third largest carmaker by sales, announced a rise in its revenue and operating profit for the first half of this year, above estimates, with a margin on adjusted EBIT almost unchanged at 14.4%.

Tavares said all automakers including Tesla would also have to face growing competition from Chinese EV makers in their domestic markets.

"What has been said by the Tesla CEO (Elon Musk), whom I respect totally, is that they prefer growth to profitability. And we'll see to which extent they will be also challenged by the Chinese," he said.

"If we are racing for the bottom in terms of facing the Chinese with price cuts, Tesla will have problems with that strategy before we do, because we are more profitable than Tesla," Tavares added.

Tesla kicked off a round of price cuts this year, including in China, putting pressure across the board on automakers and suppliers to contain costs.

(Reporting by Giulio Piovaccari; Editing by Keith Weir)