Tesla makes a profit when all eyes turn to their China Gigafactory

A record number of cars shipped in the third quarter of 2019 was enough to help Tesla make a modest profit, according to financial figures released by Silicon Valley carmaker Wednesday. And with Shanghai Gigafactory almost ready to start production of Model 3, Tesla's cheapest car, all eyes are now on China to see what kind of lift the car manufacturer can get in the largest electric car market in the world.

Tesla reported net income of $ 143 million, generating $ 6.3 billion of revenues, down slightly from the second quarter, to about $ 520 million from the third quarter of 2018. It marks the first year over – this year's quarterly revenue decline for Tesla since 2012, although the company attributes the fall to a threefold increase in the number of customers leasing their cars. (Tesla began leasing Model 3s in April this year.)

Tesla says it made its first profit since the fourth quarter of 2018 by reducing operating costs, which is the "lowest level since the production of Model 3 began" – probably helped by several cuts in the workforce the company has made, and Elon Musk's "nano" administration. The company also benefited from $ 134 million in regulatory credits, and unpublished revenue posted from the money it charged customers for the "full self-driving" version of Autopilot over the years. Tesla closed the quarter with $ 5.3 billion in cash.

2. In October, Tesla announced that it delivered around 97,000 cars in the third quarter of 2019, which means the company has just unscrewed the 95,356 it sent in the second quarter. Despite a slow start in 2019 (partly because the company shifted its focus to launch Model 3 deliveries in Europe and China), Tesla has already shipped more cars in three quarters of this year than it has done throughout 2019, largely thanks to the popularity of Model 3 – especially because sales of Model S and X have dropped almost 40 percent compared to Q3 2018.

But the slow start means that Tesla needs to pull an even more impressive fourth quarter just to hit the low end of what Elon Musk estimates for the year, which was that the company would ship between 360,000 and 400,000 cars. Still, Tesla turned for the first time since the end of 2018 with profitable back-to-back quarters; Musk has made repeated predictions that the car manufacturer would eventually rise out of the red.

This is where the new Gigafactory comes in. China is the largest EV market, and despite a recent downturn in both the car market and the overall economy, it still represents a huge opportunity for Tesla. Until now, all the cars Tesla sold in China were made in the United States and shipped to China, making them subject to tariffs and the changing wind of the trade war. Manufacturing cars locally means that Tesla should be able to sell more in China, even with a weak Chinese economy.

In its letter to investors, Tesla says that the factory in China is "ahead of schedule" and that the company already produces Model 3s "on a trial basis." Tesla says that sample production of Model Y, which is set to begin in mid-2020, is ahead of schedule.

Tesla's Shanghai Gigafactory did not come easy; the company spent many years lobbying and negotiating a way, not until China announced plans in July 2018 to easing rules that previously required foreign automakers to cooperate with Chinese car companies such as Tesla agreed to build their third Gigafactory.

After months of site selection and final negotiations, Tesla broke ground at the Shanghai Gigafactory in January this year. form at a rapid pace, with construction workers operating around the clock to raise the giant building out of what was a field of mud. Now, says Tesla, Shan is ghai Gigafactory “ready for production.” Tesla also says the new Gigafactory costs 65 percent less than the Model 3 production system it developed in the United States, which is spread between Gigafactory in Nevada and the company's original plant in Fremont, California.

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