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Tesla delivers on Elon Musk’s 3Q profit pledge

27 October, 2018, 20:51 | Author: Kristi Dunn
  • Tesla approves Model Y for production

Orders for the company's Model 3 in Europe and China would be taken before the end of this year, Tesla said. "Further, we believe the strength the company saw this quarter was aided by higher priced Model 3 variants and believe the eventual $US35,000 price point on this vehicle may make it more hard for TSLA to see similar tailwinds".

The Wall Street Journal reported that Federal Bureau of Investigation agents have contacted former Tesla employees to interview them.

"Earlier this year, Tesla received a voluntary request for documents from the Department of Justice about its public guidance for the Model 3 ramp and we were cooperative in responding to it", a Tesla spokesperson said in a statement.

Larry Ellison, the founder, CTO, and executive chairman of Oracle, defended Tesla CEO Elon Musk during an analyst meeting on Thursday and said Tesla was his second-biggest investment, Bloomberg reported.

The quarterly profit and higher cash generation advised Musk that Tesla can establish sustainable profits, without needing to constantly raise additional funds to pay towards debt and fund capital expansion.

"Model 3 is attracting customers of both premium and non-premium brands, making it a truly mainstream product", Musk said, adding that the company's "earnings profile has flipped dramatically". The company has maintained that it designed and built the Model 3 with a target 25% gross margin and nearly achieved that this quarter (albeit with a rich mix).

Tesla, which has never reported an annual profit, had been under particular strain after it ramped up spending for its launch of the Model 3, its newest auto aimed at a wider market. Gross margins on the Model 3 are above even the company's own lofty expectations and its position as the 5th most popular vehicle by volume in the USA suggests it's drawing in a wide range of customers despite its comparatively high price point.

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The company earned $311.5 million during the three months ending in September, swinging from a loss of $619 million at the same time previous year.

Many experts were critical when CEO Elon Musk claimed back in April that he would deliver positive cash flow-and profits-starting in the third quarter of 2018. When free cash flow is negative, a company needs a source of outside capital-either taking out loans or selling shares-to finance continued spending.

Central to Wood's argument that Tesla could trade as high as $4,000 per share is the idea that Tesla will orient itself away from the capital-intensive vehicle manufacturing business toward software.

Tesla is now generating cash, not consuming it and has largely managed to silence critics for the time being.

Tesla on Wednesday posted a surprise third-quarter profit thanks to strong revenue generated by its Model 3 sedan.

Such credit sales pushed Tesla to a profit in its third-quarter of 2016, one of two times it has been in the black so far.

For months critics have been warning that cash flow problems threatened the company's survival.

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