For the first time in two years, Tesla made money. They were able to report a net income of $312 million for the third quarter of this year thanks to the deliveries and sales of the Tesla Model 3 sedan. This is a positive step forward for the all-electric brand that’s been struggling to find a foothold in the market as a mass producer of vehicles. While they’re still far from being able to produce half a million vehicles in a year, the company is learning more about the production process and how to make it better.
The Revenue is Doubled
The third quarter of 2017 was a time when Tesla lost nearly $620 million and burned through $718 million to work toward the production of the Model 3. Now that the Tesla Model 3 has proved to be a successful addition to the market, and the company has figured out how to build more of them, the free cash flow reported is $881 million at the end of the quarter for this year with nearly $3 billion in the bank to help give investors the confidence they need to have in the company as they move forward.
How Did They Turn it Around?
Not long ago, Tesla was able to produce 5,000 Model 3 vehicles in one week but only after setting up an addition tented facility and going “all-in” on the production. Since that time, the company has learned more about how to produce this car more efficiently and has cut the assembly time by nearly thirty percent. In the last week of the third quarter, Tesla was able to build more than 5,300 of these cars which were able to garner a gross margin of nearly twenty percent, which is how these profits are created.
Tesla is Hanging on to the Preorders
Last year, there was a reported 455,000 customers that had placed the deposit to preorder the Model 3 and fewer than 20 percent of these orders have been canceled. Because of this customer retention, new financing plans, and the announcement that the more affordable versions would be offered in the next few months, the company should be able to hang on to the orders they have and begin to deliver the Model 3 models outside the US to reach those customers that have been waiting for a year or more.
The Sales During the Third Quarter for Tesla Model 3
There were more than 56,000 Tesla Model 3 cars delivered in the third quarter with nearly 28,000 versions of the Model S and Model X during the same time period. The movement toward more affordable electric vehicles for the brand is a transition from being a niche automaker to much closer to being a serious mass producer of the electric vehicles that we want to be able to drive. The profits and performance for this quarter have been reflected in the stock price for the company, which is another way to keep investors happy.