Tesla Releases its Q3 Earnings Report, CEO Elon Musk Calls it 'Truly Historic'
【Summary】Tesla announced its Q3 earning today and CEO Elon Musk called the company’s Q3 performance “truly historic”. The company posted a GAAP of $312 million on a record $6.8 billion in revenue, boosted by sales of the Model 3.
Tesla announced its Q3 earning today and CEO Elon Musk called the company's Q3 performance "truly historic". The company posted a GAAP of $312 million on a record $6.8 billion in revenue, boosted by sales of the Model 3.
Tesla said that it's more-affordable Model 3 electric sedan is the best selling car in the U.S. in terms of revenue and it's the 5th best selling car in the U.S. by volume. In its Q3 report, Tesla wrote that the Model 3 is becoming a "truly mainstream product".
The automaker improved upon its internal cost efficiency targets, leading to GAAP Model 3 gross margin of more than 20 percent, a bit higher than expected. The gross margins were boosted by increased sales of the higher-priced versions of the Model 3 currently on offer, as well as lower labor costs per vehicle, which decreased by 30 percent since Q2.
Tesla's total cash increased by $731 million. With a free cash flow of $881 million despite less than 10 percent of that amount coming from key working capital items such as payables, receivables and inventory.
Tesla's free cash flow of $881 million was the only the third time that number has been positive in Tesla's history and helped by a surge of new production of the Model 3, controlled spending and lower capital expenditures.
The Q3 numbers were good news for Tesla, as Elon Musk's inaccurate tweet about securing the necessary funding taking the company private sent its stock into a freefall in early August and raised questions about his ability to led the company.
Musk's tweet also sparked an investigation by the U.S. Securities and Exchange Commission, resulting in a $20 million fine, and Musk's removal as chairman for at least three years. However, Musk will remain on CEO of Tesla.
The SEC settlement requires that Tesla appoint a new independent chairman, who will oversee numerous capital intensive new projects at a crucial time for Tesla, including a new factory in Shanghai to development of Tesla's new pickup truck.
Tesla received over 450,000 orders for the Model 3 since it first started taking reservations in March 2016. Despite the long wait, Tesla said that only around 20 percent those have cancelled their orders. Tesla said it would begin taking orders in Europe and China for the Model 3 before the end of 2018.
Musk had vowed since May that Tesla would be profitable in both the third and fourth quarters, and has repeated that the company would not need any new capital from financial backers.
Tesla's production targets for June of 5,000 Model 3s per week are still below the 6,000 it hoped to achieve. However, Tesla is averaging around 4,300 Model 3s per week, which was enough to boost the company's Q3 results.
Musk has been under intense pressure to prove he can deliver consistent production numbers for the Model 3, seen as crucial to Tesla's profitability and its ability to be a high-volume car producer.
Tesla said earlier this month it built 53,239 Model 3 sedans in the quarter, in line with its target of 50,000-55,000 vehicles, and delivered 55,840 of the cars to customers. Musk said that total production this quarter, including the Model S and X, exceeded the entire year of 2016, topping out at 83,500 vehicles.
Regarding the ramp up of deliveries of the Model 3, Musk said in today's earnings call that it's unprecedented that current Tesla owners stepped up as unpaid volunteers to help new owners familiarize themselves with their newly delivered cars, adding that no other company has such dedicated people that are willing to help Tesla become successful.
Musk also thanks the thousands of Tesla employees that made the company's Q3 results possible.
"This quarter was made possible by the incredible determination of our employees." Musk said.
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