Tesla Posts a Profit; Attention Returns to Company, Not Musk

Steph Willems
by Steph Willems
tesla posts a profit attention returns to company not musk

For only the third time in the company’s history, Tesla reported a quarterly net profit on Wednesday, though this time the automaker says it’s back in black for good.

Third-quarter GAAP net income was $312 million, Tesla revealed, with the company’s performance fulfilling CEO Elon Musk’s earlier promise to become cash-positive by Q3 2018. The automaker’s free cash flow was $881 million for the quarter.

Give thanks to the tent.

It was expanded production of the Model 3, some of which occurs outside the company’s Fremont, California assembly plant, that pushed Tesla over the top. The company reported gross margins of 20 percent on Model 3s sold in the third quarter, a higher figure than predicted, with the number of labor hours per Model 3 falling by 30 percent between the second and third quarter of this year.

While the average production rate of Model 3s continues to fall below Musk’s promised 5,000 vehicles per week figure, throughput was great enough to bring in the desired cash. And customers paid plenty — the introduction of a pricier dual-motor Model 3 this summer was the revenue generator Musk needed. Tesla reported $6.82 billion in total revenue for the quarter. Overall, some 5,300 Model 3s finished assembly in the final week of September, the company claims.

Tesla cites “logistical challenges” in the first part of the quarter, including problems in getting vehicles to buyers’ homes, but improved door-to-door delivery allegedly solved much of that.

In an earnings call that did not spark controversy, Musk claimed the company “can actually be cash flow positive and profitable in all quarters going forward,” minus those in which a debt payment comes due. The company has no plans to raise debt or equity, he said.

What the company does plan to do is move forward with production of the Model Y, a cheaper crossover that may be targeted at the company’s planned Shanghai assembly plant, which is slated to build Model 3s. That plant is expected to start humming in late 2019. The Model Y, of which Musk says he’s approved the final prototype, won’t arrive until 2020.

While Tesla plans to build the Shanghai plant in a “capital efficient” manner, suggesting a tent-like structure similar to the one at Fremont, getting the operation off the ground will nonetheless generate a hefty bill. Some analysts question Musk’s assertion that it won’t need to take on more debt. That said, actually turning a profit makes the prospect more palatable.

Tesla’s stock shot up nearly 13 percent in after-hours trading following the release of its quarterly earnings. After the antics of the past few months, this was news investors wanted to hear.

[Source: Reuters] [Image: Tesla]

Join the conversation
3 of 39 comments
  • SunnyvaleCA SunnyvaleCA on Oct 25, 2018

    I wonder how much the soon-to-be-reduced federal tax incentive is pulling demand forward. People are trying to buy now with the full incentive instead of waiting. Just as the incentive is being phased out, competitors will be introducing competitive cars that have the full incentive. That won't be pretty.

    • Moose&Squirrel Moose&Squirrel on Oct 26, 2018

      We have a real world precedent to test your hypothesis. Specifically the EV market in Hong Kong last year and Tesla in particular. It got SO BAD that Hong Kong has had to reinstate the incentives to try to juice EV sales.

  • HotPotato HotPotato on Oct 26, 2018

    Tesla fanboys assured us the base $35k model could be done because Tesla was setting up a fully automated production line, aka the "alien dreadnought," that would basically eliminate the need to pay human assemblers. It was reported that the highly automated line collapsed almost immediately and a humbled Musk quickly reverted to more conventional production. So the question is, without the robotized factory, is a $35k Model 3 possible? If the rumors of the Model Y being slated for assembly in China are true, is labor cost a reason why? And given that Tesla pays so-so wages, uses lots of temps, and requires mandatory overtime that literally works people sick, how big a piece of the puzzle is labor cost really? Anyone who knows about these things care to chime in? I'm wondering if a $35k model is literally impossible or not.

  • Fred Private equity is only concerned with making money. Not in content. The only way to deal with it, is to choose your sites wisely. Even that doesn't work out. Just look at AM/FM radio for a failing business model that is dominated by a few large corporations.
  • 3SpeedAutomatic Lots of dynamics here:[list][*]people are creatures of habit, they will stick with one or two web sites, one or two magazines, etc; and will only look at something different if recommended by others[/*][*]Generation Y & Z is not "car crazy" like Baby Boomers. We saw a car as freedom and still do. Today, most youth text or face call, and are focused on their cell phone. Some don't even leave the house with virtual learning[/*][*]New car/truck introductions are passé; COVID knocked a hole in car shows; spectacular vehicle introductions are history.[/*][*]I was in the market for a replacement vehicle, but got scared off by the current used and new prices. I'll wait another 12 to 18 months. By that time, the car I was interested in will be obsolete or no longer available. Therefore, no reason to research till the market calms down. [/*][*]the number of auto related web sites has ballooned in the last 10 to 15 years. However, there are a diminishing number of taps on their servers as the Baby Boomers and Gen X fall off the radar scope. [/*][/list]Based on the above, the whole auto publishing industry (magazine, web sites, catalogs, brochures, etc) is taking a hit. The loss of editors and writers is apparent in all of publishing. This is structural, no way around it.
  • Dukeisduke I still think the name Bzzzzzzzzzzt! would have been better.
  • Dukeisduke I subscribed to both Road & Track and Car and Driver for over 25 years, but it's been close to 20 years since I dropped both. I tried their digital versions with their reader software (can't remember the name now), but it wasn't the same. I let it lapse after a year.From what I've seen of R&T's print version, it's turned into more of a lifestyle thing like The Robb Report. I haven't seen an issue of C/D in a while.I enjoyed both magazines a lot when I was subscribing. R&T for the road tests (especially the April Fools road tests), used car reviews, historical articles, and columns like Peter Egan's Side Glances and Dennis Simanitis's Technical Correspondence. And C/D for the road tests and pithy commentary, and columns like Gordon Baxter's, and Jean Shepherd's (that goes way back to the early '70s).
  • Steve Biro It takes very clever or amusing content for me to sit through a video vehicle review. And most do not include that.Tim, you wrote :"Niche titles aren't dying because of a lack of interest from enthusiasts, but because of broader changes in the economics of media, at least in this author's opinion."You're right about the broader changes in economics. But the truth is that there IS a lack of interest from enthusiasts. Part of it is demographics. Young people coming up are generally not car and truck fans. That doesn't mean there are no young enthusiasts but the numbers are much smaller. And even those who consider themselves enthusiasts seem to have mixed feelings. Just take a look at Jalopnik.And then we come to the real problem: The vast majority of new vehicles coming out today are not interesting to enthusiasts, are not fun to drive and/or are just not affordable.You can argue that EVs are technically interesting and should create enthusiasm. But the truth is they are not fun to drive, don't work well enough yet for most people and are very expensive.EVs on the race track? Have you ever been to a Formula E race? Please.And even if we set EVs aside, the electronic nannies that are being forced on us pretty much preclude a satisfying driving experience in any brand-new vehicle, regardless of propulsion system. Sure, many consumers who view cars as transportation appliances may welcome this technology. But they are not enthusiasts. I don't know about you, but I and most car fans I know don't want smart phones on wheels.There is simply not that much of interest to write about. Car and Driver and Road & Track are dipping deeper into nostalgia and their archives as a result. R&T is big on sponsoring road trips for enthusiasts - which is a great idea. But only people with money to burn need apply.And then there is the problem of quality in automotive writing. As more experienced people are let go and more money is cut from publications, the quality and length of pieces keeps going down, leading to the inevitable self-fulfilling prophecy.Even the output on this site is sharply reduced from its peak. And the number of responses to posts seems a small fraction of what it used to be. This is my first comment since the site was recently relaunched. I don't expect to be making many in the future.Frankly Tim - and it gives me no pleasure to write this - but your post makes me feel as though the people running this site have run out of ideas and TTAC's days may be numbered.Cutbacks in automotive journalism are upsetting. But, until there is something exciting and fun to write about, they are going to continue. Perhaps automotive enthusiasm really was a 20th century phenomenon..