Tesla has posted a profit for the first time in three years. Perfect timing for CEO Elon Musk, who wants to move forward with the contentious plans to merge his electric carmaker with the solar panel company SolarCity. John Dyer reports from Boston.
After 12 quarterly losses, the Californian electric carmaker Tesla posted a profit on Wednesday. The USD 22 million profit for the third quarter ending in September was Tesla’s second time in the black since the company’s was founded 13 years ago.
Musk: Best moment in Tesla’s history
The positive results reflect the interest in the company’s forthcoming Model 3 sedan.
“I’m very proud of the team for executing so well,” said CEO Elon Musk in a conference call with analysts and the press. “It’s definitely one of the best moments in Tesla history.”
Musk dismissed criticisms that the results will come at the expense of the fourth quarter. “This is not true,” Musk said. “We were able to have our best quarter ever, and we are heading toward a great fourth quarter as well.”
Tesla’s revenues were USD 2.3 billion, or more than double last year in the same quarter, according to its filing. It delivered 25,000 vehicles in the quarter, repaid USD 600 million in debt and had around USD 3.1 billion in cash on hand.
300,000 orders for Model 3
Sales of the Model S sedan and Model X sport-utility vehicle, cost cutting and the sale of pollution tax credits to mass-market auto manufacturers helped deliver the good news, according to the company’s filing. The company now has 300,000 orders for its soon-to-be-released Model 3. At USD 35,000, the car is relatively inexpensive compared to Tesla’s other luxury brands.
Tesla earned USD 139 million from the tax credit sales, an increase from USD 39 million last year and more than the USD 30 million that analysts expected the company to gain.
Musk added that the company was on track in the construction of its new battery factory in Nevada in order to hit its target of increasing car production from 50,000 last year to 500,000 by the end of 2018. The factory is being built in stages and is slated for completion in 2020.
Good news for planned merger
The results were good news for Musk’s plans for a USD 2.2 billion merger with SolarCity, a photovoltaic panel installation company. Musk is chairman of the SolarCity board. Shareholders are scheduled to vote on the merger on November 17.
Musk wants to marry SolarCity’s residential business with Tesla’s battery production to further expand solar energy in the United States and beyond. The two companies are slated to unveil new solar panels and batteries that hook up to a Tesla vehicle charger.
“I think you’ll be pleasantly surprised by what we debut on Friday,” Musk said on the conference call. “It has exceeded my expectations. It’s really good.”
Not enough money for merger
But critics have panned the merger because neither Tesla nor SolarCity have been generating big profits despite Musk’s promises of success.
“For investors, it’s crucial to treat Tesla just like any other company,” said Investing.com Analyst Clement Thibault. “This means demanding deadlines be kept and promised targets achieved.”
Thibault and others noted that Tesla could face new crises. Federal authorities are stilling investigating a fatal accident in Florida this past summer that occurred after Tesla’s self-driving Autopilot function failed to detect a truck.
Oppenheimer & Company has estimated that Tesla and SolarCity need USD 12.5 billion in the next two years to cover the costs of a combined company – more than either has without appealing to potentially skeptical investors.
Tesla also requires USD 2.5 billion to complete its Nevada factory, said Barclays automotive analysts Brian Johnson.