Tesla makes a profit – and builds a Chinese factory very quickly
Whether you're a bullish Tesla superfan or an intense skeptic, one thing you can agree on: The electric car manufacturer, and the irreverent and creepy CEO, are rarely boring. Tesla reported quarterly revenue on Wednesday, showing that the company is regaining profitability (albeit by a narrow margin). Even more impressive: Tesla said it had designed the Shanghai Gigafactory – which it says will eventually sweep out 150,000 cars a year – in 168 business days.
Stock prices shot up 20 percent late Wednesday on the news of Tesla's $ 143 million in quarterly net income, the first time the company has been in the black since the end of last year. It attributed the jump to cost reductions, which CFO Zach Kirkhorn said was now "ingrained in the team culture."
But the quarter marked the company's first year-over-year decline since 201[ads1]2. The company attributes the 8 percent fall in part to the leasing program, which debuted this spring. CEO Elon Musk said the company was still on track to sell 360,000 cars by the end of the year, which would have seen Tesla grind out a record 105,000 cars in the last three months of 2019.
Serious things are happening in Shanghai , the site of Tesla's other manufacturing facilities, company executives said on a phone call with investors. The carmaker's "low price" vehicle Model 3 is already moving through assembly lines on a trial basis, and Musk ushered in the "massive" stamping machines and paint shop in operation. He also confirmed media reports that another building is under construction in the Shanghai complex to handle battery and module production. Tesla hopes to produce 1000 Model 3s a week from the factory by the end of the year. It will also produce Model Ys, the affordable crossover model, at the plant.
In its earnings report, Tesla said it is working on completing its local production license and meeting "other government requirements" before expanding production in Shanghai.
That's good news for Tesla, because China is crucial to the car manufacturer's future. Although the country's economy has been hit by a trade war with the United States, it still has some of the most electric vehicle-friendly regulations on the planet. Chinese car buyers modest 1 million electric cars in 2018, and will buy 2 million next year, according to a report by Bloomberg New Energy Finance. Nearly 70 percent of China's cars could be electric by 2040.
But China has until this year demanded that foreign car manufacturers associate with domestic cars to be produced in the country, avoiding an import duty of 25 percent. Tesla will be the first foreign company to take advantage of China's new rule, allowing foreigners to produce vehicles in the country without a Chinese partner. The company believes China will be the strongest Model 3 market. Last month, an analyst said he suspected Tesla sales in China are increasing.
Musk also used Wednesday's call to provide an update on other projects. The Model Y, which is currently under production at the company's plant in Fremont, California, is ahead of schedule, said the CEO, and drivers should be able to get hold of one starting in the summer of 2020. He hyped what he now calls "Cyber Truck, "Tesla's electric pickup, calling it" our best product ever. "(The truck is scheduled to unveil an event next month.)
