Tesla Q3 - Surprise profits

Tesla reported blockbuster, eye-popping quarterly profits in its third, and the most profitable quarter since listing. Most analysts expected to see more red on the profit and loss statement.

The electric car company posted a profit of $312 million, or $2.92 per share, as compared to analysts expectations of a $0.19 loss per share. This is all thanks to the almighty Tesla Model 3 sedan ramp up, as the company managed to produce 53 239 vehicles during the quarter.

Revenues came in at $6.82 billion, well above analysts expectations of $6.33 billion, notwithstanding all the funding secured tweet drama surrounding Elon Musk and the company itself.

The Model 3 production timelines are starting to accelerate, making it the best-selling car in the US, measured by revenues and the fifth best-selling car by volumes. The Model 3 sedan now takes less time to build than the Model S sedan and the Model X SUV, thanks to the 30% reduction in labour hours to build a Model 3.

I find it quite interesting that famed short-seller Andrew Left of Citron Research, and a big critic of Elon Musk and Tesla, happened to reverse his long-term dubiousness. Then suddenly he's a buyer of Tesla shares and then boom surprise profits? Nonetheless, it was a good call on his side as the shares of Tesla were up over 8% in late trade.

CEO Musk said "We will focus even further on cost improvements while continuing to increase our production rate. . . probably on the order of anywhere from 500 000 to 1 million cars a year." These are some very steep long-term production goals for Tesla.

Due to the ongoing trade wars between Donald Trump and China, the company has resorted to producing vehicles and batteries locally in China. A new factory will be based in Shanghai, and it'll be used as a mechanism to reduce the impact of tariffs in China, which the company said have increased the tax rate on US cars sold in China to 40%. All other country car imports into China are only 15%.

Tesla produced $881 million in free cash flow, a $731 million boost after settling some $82.5 million in bonds. Musk said that "Our cash position should remain at least flat in spite of our plan to repay $230 million of convertible notes in cash during Q4." I guess this addresses the Tesla cash crunch that everyone has been talking about.

The company seems to be putting more focus on what really matters here and that's the production ramp up of the Tesla Model 3. So far so good. The company is up just over 20% in two trading days.