Elon Musk: Tech pioneer
Tesla delivered a rare quarterly profit as the company ramped up production of its Model 3 electric car, inching closer to financial sustainability even as big-ticket spending items linger in the near future.
Embattled CEO Elon Musk cited the performance Wednesday as proof that Tesla has achieved viability despite tremendous skepticism.
Tesla shares jumped 8.2 percent in after-hours trading to $312.93 on Wednesday.
The performance came during a tumultuous quarter for Musk, who agreed to give up his Tesla chairmanship as part of a settlement with the Securities and Exchange Commission.
The SEC had sued Musk over his dubious Twitter claims that he had lined up a deal to take Tesla private.
The Palo Alto, Calif.-based automaker reported net income of $312 million in the third quarter, a year after reporting a net loss of $619 million.
The profit comes as Tesla racks up cash from sales of the Model 3 electric sedan, its most important vehicle yet because it is the first aimed at the mass, not luxury, market. While the ramp-up of manufacturing took longer than usual for a car company, the pace of production has improved along with Tesla's finances.
Third-quarter total revenue soared from $2.98 billion a year ago to $6.82 billion.
"Sufficient Model 3 profitability was critical to make our business sustainable – something many argued would be impossible to achieve," Musk said in a letter to investors.
To be sure, profitability may not last for long. The company is investing in a new plant in Shanghai to make electric cars for China and it is also expected to spend to deliver a new electric crossover called the Model Y within the next few years. Tesla has also outlined other costly ambitions, including production of an electric semi-truck and sports car.
Musk said he "recently" approved the Model Y prototype to go into production with a goal of making the vehicle in high volumes in 2020.
A more immediate question is whether Tesla will offer cheaper Model 3 versions soon and whether it can continue making money when it does. In the third quarter, Model 3 carried a starting price of $49,000.
The company still intends to deliver the Model 3 at its originally promised starting price of $35,000. Musk said it could be ready as soon as February, but the company is not currently able to make the battery pack for it.
"We’re trying to provide as many affordable electric car options as we can," Musk said on a conference call.
UBS analyst Colin Langan expressed skepticism that Tesla can maintain profitability when it begins selling cheaper Model 3 cars.
But Tesla said it expects to continue wringing excess costs out of vehicle production. "While the average selling price will gradually decline as we introduce lower-priced variants, we are not expecting this to impact profitability," Musk wrote.
The company sped up electric-vehicle production to 80,142 vehicles during the third quarter, including 53,239 Model 3 units.
Overall, the total output marked a 50 percent increase from the second quarter, which was the company's previous high.
Vehicle deliveries — what the rest of the auto industry would typically label as vehicle sales — totaled 83,500 for the quarter, including 55,840 Model 3 cars.
In the "long term," Musk predicted that global demand for the Model 3 would hit 500,000 to 1 million cars annually.
The company expects to begin European sales of the Model 3 in the first quarter of 2019 and Asia sales soon thereafter, Musk said. The car is currently sold only in North America.
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.