Musk’s comeback: Tesla profitable for the first time in 2 years

October 27, 2018 8:00 am


After a lengthy episode of botched privatization plans that got Elon Musk removed as Chairman, the electric vehicle (EV) manufacturer has posted its first profit in 2 years.

They have the amped up production of the Tesla Model 3 car to thank for that.

A promise kept

Sentiment regarding Tesla and its controversial CEO wasn’t positive in 2018. Given the lack of profitability and Musk’s erratic spontaneity and explosive tweets, investors and the general market were uncertain of the company’s standing. CNBC wrote earlier this year that the company hasn’t been overall profitable in the past 8 years since its IPO. Future prospects weren’t looking that bright either.

Now, however, the company and its CEO could finally be cut some slack.

Tesla’s Q3 2018 report revealed a net profit, positive cash flow and wider-than-expected margins, Reuters reported. This resulted in a 14% rise in its share value directly after the news.

“This is only the third time that [Tesla’s cash flow] has been positive in Tesla’s 15-year history,” the news agency noted.

Tesla recorded $6.8 billion in revenue in Q3 2018, and noted $311 million in profits. This is the highest amount of profits the company has ever made in a single quarter.

The report also showed $3.0 billion of cash and cash equivalents, which is an increase of $731M from the previous quarter.

READ: Elon Musk and the case of the sleep-deprived CEO

“Q3 2018 was a truly historic quarter for Tesla,” CEO Elon Musk and CFO Deepak Ahuja wrote in a letter to investors. “Model 3 is attracting customers of both premium and non-premium brands, making it a truly mainstream product.”

This news falls in line with what Musk had said earlier this year, with promises of profitability following an increase in the production of Model 3 units. His words have checked out, as Tesla’s data cited that exact reason for the increase in profits.

“Tesla now says it is now pulling in more than a 20% margin on the car,” The Verge reported. “It did this thanks to a reduced cost of raw materials, but also by cutting the number of labor hours needed to make each Model 3. Tesla says this figure dropped 30% from the second quarter to the third.”

Model 3 was the best-selling car in the US in terms of revenues and the 5th best-selling car in terms of volumes

READ: Saudi secures its investments, funds Tesla rival with $1 billion

A remarkable comeback

August and September of this year were not favorable months for Tesla.

After it was revealed that the Public Investment Fund (PIF), a Saudi sovereign wealth fund, had acquired 5% of the electric automaker, Musk shared an explosive tweet that had claimed “funding [was] secured” to take Tesla private. It wasn’t long before the declaration blew up in his face.

Tesla and Musk were sued by the US Securities and Exchange Commission (SEC) for “market disruption,” and faced a $20 million fine each. Musk was effectively removed as Chairman of the Tesla board. He remained as CEO, however.

With this latest bit of news, however, Tesla could finally be seeing the light at the end of the tunnel.

READ: How Saudi’s PIF rep meeting with Tesla led to Musk’s downfall

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Mark Anthony Karam
By Mark Anthony Karam
Journalist
Mark Anthony Karam has 3 years experience in the field of visual and written media, having earned his Masters degree from the UK. You can get in touch with him here: [email protected]



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