Tesla's shares were up by more than 12% after unexpectedly reporting a third-quarter profit at its earnings call on 24 October local time.
Under Musk’s leadership, the high-tech automaker has been on something of a rollercoaster and its most recent climb came on the back of the company achieving efficiency gains on the production of its Model 3 vehicles.
Musk recently stepped down as Tesla Chairman in a plea deal with the US Securities and Exchange Commission after he was charged with securities fraud in relation to tweets he posted claiming he had secured funding to take the company private.
He agreed to leave the chairman position for at least three years.
— WIRED (@WIRED) October 25, 2018
Tesla’s cash flow and profitability have improved markedly
Tesla generated US$6.8 billion in revenue for the quarter and a profit of US$311 million. It was the company’s most profitable quarter on record.
Whether such profits are sustainable remains an open question. The company reduced spending on upcoming models, delayed supplier payments and directed its energies into selling as many cars as possible.
The pivotal challenge for the company in coming quarters will be achieving mass-market penetration through cost-effective production of the once troublesome Model 3. Key to this will be moving at least part of the production to China. The company said at the earnings report that this transition will occur as soon as 2019.
For Q3 2018, the Model 3 was the best-selling car in the US in terms of revenue but fifth by volume.
Tesla reported a rare profit in the third quarter, thanks to a surge in the production and sales of its Model 3 sedan https://t.co/qNuAbhVHIb
— The New York Times (@nytimes) October 24, 2018
“Elon Musk’s redemption”: the latest twist in Tesla’s fortunes is an unexpected quarterly profit
The outgoing Musk, who has been known to be crotchety with journalists at earnings calls, was in a chipper mood and forecast that Tesla would now be profitable in “all quarters going forward”.
He also touched on the unusual level of devotion Tesla inspires. “Customers actually cared about the future of the company so much that they volunteered their time to help the company succeed,” he said. “It chokes me up, actually.”
– Tesla posts net profit of $311.5 million
– Free cash flow was $881 million, the third time that number has been positive
– Model 3 production is up to 4,300 vehicles per weekhttps://t.co/0BNChTksIp
— Reuters Business (@ReutersBiz) October 24, 2018
“The third quarter in many ways serves as Elon Musk’s redemption—you may not agree with his approach, but you can’t argue with the numbers,” said Jeremy Acevedo, manager of industry analysis at Edmunds.
Jeremy Acevedo, Manager of Industry Analysis at Edmunds, said the quarter “in many ways serves as Elon Musk’s redemption.
“You may not agree with his approach, but you can’t argue with the numbers”.
Acevedo also noted Tesla’s domination of the electric car sector; it has accounted for 76% of pure electric car sales in the US this calendar year.
The company also appears to be eyeing a move into the liquor sector, having recently applied for trademark protection to use the word ‘Teslaquila’ in connection with a blue agave spirit.
Header image credit: Thomas Hawk