Tesla reports its first profit
Firm expected to start making a more affordable Model 3 next year
Tesla on Wednesday reported a profit of $312 million (U.S.) for the third quarter, thanks to a surge in production and sales of its Model 3 sedan.
The company also ended the period with $3 billion in cash compared with $2.4 billion at the end of the previous quarter.
The report is a key milestone for the company’s chief executive, Elon Musk, who had vowed the Model 3 would carry the company to profitability in both the third and fourth quarters of this year.
The earnings help stabilize Tesla’s finances and end a streak of quarters in which the automaker used up close to $1 billion in cash.
But the company still must prove it can produce profits consistently. Its third-quarter earnings were helped by costcutting, deferring spending on future models, and rushing to sell as many cars as possible. The surge in sales could cause demand to soften in the fourth quarter.
In the 15 years since it was founded, Tesla has never reported an annual profit.
In previous quarters, the company’s costs increased as it made more cars.
To finance its operations, the electric vehicle and solar energy company has had to sell stock, take out loans and ask customers to make $1,000 refundable deposits for cars they might not get for months or years.
To become consistently profitable, the company needs the Model 3, which currently sells for $46,000 to $64,000 before federal and state tax incentives, to be a commercial success.
Tesla produced more than 53,000 Model 3 cars from July to September — nearly twice as many as in the previous three months. Deliveries of the Model 3 totalled more than 55,000, about three times as many as in the previous quarter.
Tesla remains under financial pressure, and faces several ma- jor challenges. It has to make bond payments of $230 million in November and $920 million in March. It can use stock for the second payment but only if its share price is above $360.
Tesla shares closed at $288.50 on Wednesday before its earnings were released, down more than 20 per cent from early August. The stock was up more than 10 per cent in aftermarket trading on Wednesday afternoon.
Tesla next year is supposed to start making a more affordable version of the Model 3 priced at $35,000, and Musk has said that Tesla would lose money on that model if the company produced it now.
The cheaper Model 3 is important because the $7,500 federal tax credit available to buyers of Tesla cars will be cut by half on Jan. 1 and phased out entirely over the course of 2019, making its cars more expensive.
The company is still struggling to to deliver cars to customers, which Musk has described as “delivery logistics hell.” The quality of the Model 3 has also come under question as many customers have complained about receiving cars with scratched paint, cracked windows and other defects.