Tesla turns a profit, says Model 3 on track and on budget

Shares in Tesla Motors got a brief 6 per cent bump on Wednesday after the US EV maker surprised Wall Street with its first quarterly net profit in more than three years.

Tesla said it earned $US22 million, or 14 cents a share, in the third quarter, versus a loss of $US1.78 a share in the third quarter of 2015. The company’s revenue rose to $US2.3 billion, compared with $US937 million a year ago.

Perhaps even more impressively, the car maker kept its forecast to deliver 50,000 vehicles in the second half of the year, saying it would top 25,000 vehicles in the fourth quarter, while also suggesting a substantial reduction in production costs for its high volume Model 3 sedan.

Reuters reports that Tesla CEO Elon Musk told analysts on Wednesday that the company’s current plan “does not require any capital raise for the Model 3 at all,” but added Tesla could still raise capital to “account for uncertainty … and de-risk the business.”

All of the above will be a welcome win for Musk, who last month told staff the company was “on the razor’s edge” of achieving profitability and positive cash flow for the third quarter.

“I’m confident that we can rally hard and push the results into positive territory,” he wrote in an emailed pep-talk. “It would be awesome throw a pie in the face of all the naysayers on Wall Street who keep insisting that Tesla will always be a money-loser!”

Analysts – who according to reports, had expected a loss of 22 cents in the quarter on sales of $2.2 billion – can consider the pie thrown. But not everyone is convinced that one good quarter a turn-around makes.

“Wipe the pie from your eyes… and some interesting details in the numbers make you wonder whether, even with another company-wide email from the boss, Tesla can sustain this,” writes Bloomberg’s Liam Denning.

While Denning conceded the latest quarter’s operating cash flow of $424 million was easily Tesla’s best ever, he – among other analysts – argues there is more to the result than higher vehicle sales and cost discipline – namely a spike in revenue from credits Tesla earns for selling zero-emission vehicles.

Another contributing factor, he says, could be the spike in Tesla’s payables and accrued liabilities, mostly trade payables the company owes but has yet to pay (in cash).

But Musk has told analysts he believes the company can turn a profit again in the fourth quarter, and says that in the short term, sales of a new 100kWh version of the Model S, which starts at $US134,500 and can travel 507km on a single charge, will be key to that profitability.

The company is also continuing to spruik the benefits of its pending acquisition of SolarCity, reports Bloomberg, and plans to showcase a new solar-roof product and improved battery for home energy storage in Los Angeles on Friday night.