Tesla said its Shanghai Gigafactory in China is already producing Model 3s “on a trial basis” and production of the Model Y, which is slated to begin in mid-2020, is ahead of schedule

By Ian Horswill

Posted on October 24, 2019

Tesla shares soared by up to 20% in after-hours trading after the automotive and energy company founded by Elon Musk recorded a third quarter profit of US$342 million.

The result, against Wall Street predictions of a US$257 million loss, marked the first quarter Tesla was profitable since the company posted back-to-back profits in the second half of 2018. Tesla had posted profits only in two quarters since it went public in 2010 – in 2013 and in 2016.

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The profit was driven by a record number of cars, mainly Model 3, manufactured at its factories in Fremont, California, and near Reno, Nevada, according to financial figures released by the Silicon Valley automaker on Wednesday. With Tesla’s Shanghai Gigafactory in China about to begin production of the Model 3, Tesla looks to be on the up.

Tesla Model 3 Elon Musk
Tesla Model 3 is going to be built in Shanghai.

Tesla generated US$6.3 billion of revenue, slightly down from the second quarter, and down about US$520 million from the third quarter of 2018. Tesla CEO Elon Musk attributed the drop to a tripling in the number of customers leasing its cars. Tesla started leasing Model 3s in April.

Tesla said it recorded a profit by reducing operating costs, which are the “lowest level since Model 3 production started”. Tesla also benefited from US$134 million in regulatory credits, and an undisclosed amount of revenue booked from the money it has charged customers for the “full self-driving” version of Autopilot over the years. Tesla ended the quarter with US$5.3 billion in cash.

Tesla announced on 2 October that it delivered around 97,000 cars in the third quarter of 2019, meaning the company just edged out the 95,356 it shipped in the second quarter. Tesla has already shipped more cars in three quarters this year than it has in all of 2018, thanks in large part to the popularity of the Model 3.

Tesla Model Y Elon Musk
Model Y will offer optional third-row seats for a seven-passenger seating capacity. Photo: Wikipedia

Tesla’s factory in Shanghai means it can sell the Model 3 with tariffs and trade costs. China is the biggest market for EVs and, despite a recent downturn in both the automotive market and overall economy, it still represents a huge opportunity for Tesla, The Verge reported.

In its letter to investors, Tesla said its factory in China is “ahead of schedule,” and that the company is already producing Model 3s “on a trial basis”. Tesla says trial production of the Model Y, which is slated to begin in mid-2020, is ahead of schedule.