Electric Vehicles drive Tesla into profit

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TESLA shares soared as much as 21% after the company announced it achieved profitability for the first time in three quarters.

This defied Wall Street analyst forecasts of a quarterly loss and marked the stock’s biggest intraday surge since May 2013.

On 23 October the company announced its quarterly profit to the investors, as Chief Executive Elon Musk promised a 2020 roll-out of a cheaper SUV and more self-driving technology.

On the same day Tesla posted a cash balance increase to $5.3 billion and reported a profit of $1.86 per share, shattering analyst expectations for a loss of 42 cents per share.

Shares rose nearly 21% to $307.12 hours after the news, crossing $300 for the first time since 1 March.

“Last year, our story was about ramping the Model 3. While total volumes are expected to grow by approximately 50% in 2019, this year our focus has been cost control and preparing for our next phase of growth. Despite reductions in the average selling price (ASP) of Model 3 as global mix stabilises, our gross margins have strengthened”, the company states in their Q3 report.

“Additionally, operating expenses are at the lowest level since Model 3 production started. As a result, we returned to GAAP profitability in Q3 while generating positive free cash flow. This was possible by removing substantial cost from our business.

“We have also dramatically improved the pace of execution and capital efficiency of new production lines. Gigafactory Shanghai was built in 10 months and is ready for production, while it was ~65% less expensive (capex per unit of capacity) to build than our Model 3 production system in the US.

“Continued volume growth and cost control are an important combination for achieving sustained, industry-leading profitability.”