Tesla stuns critics by posting profit, defying CEO Elon Musk’s critics and sending its stock soaring

  • Analysts had been universally sceptical of Elon Musk’s promise of a third-quarter profit, but he delivered on the back of strong Model 3 sales
PUBLISHED : Thursday, 25 October, 2018, 5:53am
UPDATED : Thursday, 25 October, 2018, 6:22am

Tesla Motors delivered on CEO Elon Musk’s promise to make money during its latest quarter after fulfilling his pledge to boost production of its first electric car designed for the mass market.

The quarterly profit, only the third in Tesla’s history, bolsters Musk’s bid to make selling electric cars a financially sustainable business.

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

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Adjusted net income was US$2.90 a share, soundly beating analysts’ average estimate for a small loss, as the Model 3 quickly became one of the top-selling sedans in the US once the company managed to resolve a series of production bottlenecks.

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Tesla shares surged as much as 11 per cent after the close of regular trading on Wednesday, while other stocks were hammered.

The electric car and solar panel maker delivered more than 80,000 vehicles from July through September, and Musk told employees late in the quarter that it was close to profitability.

Still, of 15 analysts who follow the company, not one expected Tesla to make money. As a group, they had expected a net loss of US$173.8 million, or 95 cents per share.

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Free cash flow was about US$881 million, a turnabout from the billions of dollars Tesla was burning on a quarterly basis while it was struggling to ramp up the Model 3. Even as deliveries took off, Tesla managed to maintain more than US$900 million in customer deposits, showing that there’s still plenty of pent-up demand for the company’s cars.

Tesla reaffirmed its forecast for profit and positive free cash flow in the fourth quarter, adding credibility to its chief executive officer’s prediction a quarter ago that the company will make those feats routine going forward.

Tesla has eked out profits in the past in part thinks to sales of zero-emission vehicle credits to other automakers. This did help matters last quarter, adding US$52.3 million in revenue, but the company would have pulled off a profit regardless.

Additional reporting by Associated Press