Published: Sun, October 28, 2018
Markets | By Erika Turner

Tesla Shares Rise on Q3 Profit Beat

Tesla Shares Rise on Q3 Profit Beat

Tesla scheduled its earnings release earlier in the calendar than usual, most likely because it is expecting to report a profit, Mainstay Capital Management strategist David Kudla said. The automaker made 5,300 Model 3s during the final week of the third quarter, less than the weekly goal of 6,000 it had set for the end of August.

In a letter to investors, Mr Musk called the quarter "historic" and said it was a credit to the firm's "ingenuity and incredible hard work".

The vast majority of cars traded in by Model 3 buyers are non-premium models priced new at less than $35,000.

Tesla hopes to start production of its next model in 2020 and is also making plans for a Tesla ride-hailing service, Mr Musk added.

Tesla said in Friday's statement that investigators came to the company earlier this year and the company provided requested documents. Tesla had promised to produce 5,000 Model 3s every week by the end of previous year, but only managed to make 2,700 units.

Auto Data site Edmunds noted Tesla is by far the biggest electric vehicle maker in the US market, accounting for 76% of pure EV sales in the first three quarters of 2018.

Some analysts also said the positive earnings report indicated that Tesla was turning a corner since facing a spate of bottlenecks and hangups as it ramped up production of the Model 3.

A Tesla spokesman said the company was transparent about the difficulty of increasing production of the Model 3.

Tesla has already been forced to build a production line in a tent at its California factory to expand Model 3 production.

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"Consumers are coming up for lease renewal or new auto decision and opting into a Tesla - it is not just pent up demand", Left wrote.

Tesla has yet to develop full self-driving software, as it races other major companies investing in the technology, including Apple, Amazon, General Motor's Cruise, Intel's Mobileye, and Alphabet's Waymo (just to name a few).

Tesla, Inc shares were trading at $314.86 per share on Thursday afternoon, up $26.36 (+9.14%). Shortening the time cars are in transit so that revenue can hit the books more quickly would shorten its cash conversion cycle, boosting cash flow. The company produced more than 56,000 Model 3 sedans during Q3.

The Model 3 sedan was a huge driver for the quarter.

On production, Wood was bullish, saying Tesla will "iterate and iterate until they get it right, and then, they are going to be able to scale enormously when they get it right".

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.

In addition, building the duo in China will allow Tesla to avoid tariffs on Model 3 and Model Y vehicles it sells in China, which it would otherwise have to face if it imported them from another country.

In order to increase the affordability of the Model 3, Tesla accelerated its manufacturing timeline in China.

Having no side mirrors is a growing trend in the world of concept cars that will surely make it to road-safe vehicles sooner rather than later.

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