Tesla offers profits: & # 039; Many argued & # 039; it was "impossible", says CEO Elon Musk
Tesla offers profits: & # 039; Many argued & # 039; it was "impossible", says CEO Elon Musk
http://platform.twitter.com/widgets.jsTesla made a rare quarterly profit as the company increased the production of its Model 3 electric car, moving closer to financial sustainability, even as major expenses persist in the near future.
Embattled president Elon Musk cited Wednesday's performance as proof that Tesla has achieved viability despite tremendous skepticism.
Tesla shares rose 8.2 percent in post-closing trades to $ 312.93 on Wednesday.
The action took place during a tumultuous quarter for Musk, who agreed to resign his presidency at Tesla as part of an agreement with the Securities and Exchange Commission.
The SEC had sued Musk over his dubious claims on Twitter that he had signed an agreement to take Tesla privately.
Plus: The Elon Musk deal in the SEC is a victory for Tesla buyers, but it could damage its reputation.
Plus: Consumer Reports: Tesla's reliability drops to the bottom in the latest survey
Plus: Tesla CEO Elon Musk touts the new Model 3, but it's a bit more expensive than many expected
The Palo Alto, California-based carmaker reported a net income of $ 312 million in the third quarter, one year after reporting a net loss of $ 619 million.
The benefit comes when Tesla accumulates cash from the sales of the electric sedan Model 3, its most important vehicle so far, because it is the first aimed at the mass market, not luxury. While the acceleration of manufacturing took longer than usual for an automotive company, the pace of production has improved along with Tesla's finances.
Total revenues for the third quarter increased from $ 2.98 billion a year ago to $ 6.82 billion.
"Sufficient profitability of Model 3 was instrumental in making our business sustainable, something that many argued would be impossible to achieve," Musk said in a letter to investors.
Without a doubt, profitability may not last long. The company is investing in a new plant in Shanghai to manufacture electric cars for China and is also expected to spend to deliver a new electric crossover called Model Y in the coming years. Tesla has also described other costly ambitions, including the production of a semi-electric truck and a sports car.
Musk said he "recently" approved the Model Y prototype to go into production with the goal of manufacturing the vehicle in large volumes by 2020.
A more immediate question is whether Tesla will soon offer cheaper versions of the Model 3 and if it can continue earning money when it does. In the third quarter, Model 3 had an initial price of $ 49,000.
The company still intends to deliver Model 3 at its promised initial price of $ 35,000. Musk said it could be ready in February, but the company currently can not make the battery pack.
"We are trying to offer as many affordable electric car options as we can," Musk said in a conference call.
UBS analyst Colin Langan expressed skepticism that Tesla can maintain profitability when it starts selling cheaper model 3 cars.
But Tesla said he hopes to continue eliminating the excessive costs of vehicle production. "While the average selling price will gradually decrease as we introduce lower-priced variants, we do not expect this to have an impact on profitability," Musk wrote.
The company accelerated the production of electric vehicles to 80,142 vehicles during the third quarter, including 53,239 Model 3 vehicles.
In general, total production marked a 50 percent increase since the second quarter, which was the company's previous maximum.
Vehicle deliveries, which the rest of the automotive industry would typically label as vehicle sales, totaled 83,500 for the quarter, including 55,840 Model 3 cars.
In the "long term," Musk predicted that global demand for Model 3 would reach 500,000 to 1 million cars annually.
The company expects to start European sales of Model 3 in the first quarter of 2019 and sales in Asia soon after, Musk said. The car is currently sold only in North America.
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.
Read or share this story: https://www.usatoday.com/story/money/cars/2018/10/24/tesla-earnings-elon-musk/1741755002/
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