Tesla said on Wednesday it reported a profit of $ 139 million, or $ 0.78 per share, and better-than-expected sales but failed to meet earnings analyst expectations in the fourth quarter. Shares, which initially fell after the markets closed, rose 0.7%.
Tesla was able to merge two profit periods in a row thanks to Model 3 sales and despite several backwashes in the fourth quarter, including a non-cash expense of $ 54 million attributable to non-controlling interests, higher import duty on components from China, a price reduction for Model S and Model X in China, and the introduction of a lower-priced mid-range version of Model 3.
Tesla's profitable fourth quarter is in stark contrast to its financial position in the same period last year when it posted a loss of $ 675 million, or $ 1.75 a share.
Perhaps, as important as the carmaker's income, is his cash position. Tesla said its cash position improved by $ 1.45 billion in spite of a scheduled payment of $ 230 million in convertible bonds in the fourth quarter.
"We have enough cash on hand to comfortably settle our convertible bond that will expire in March 2019," the letter to shareholders said.
Here are some of the highlights:
- Tesla's fourth quarter revenue was $ 7.2 billion, up from $ 6.8 billion in the third quarter
- Tesla's fourth-quarter operating cash flow, minus capital expenditures, improved to $ 910 million
- Cash and cash equivalents increased US $ 718 million to US $ 3.7 billion at the end of the fourth quarter
- Production volumes for model 3 in Fremont are expected to reach a sustained rate of 7,000 units per week by the end of 2019
In October, Tesla reported its first profit after seven consecutive quarters of losses. It was only the third time in its history that it reached that milestone.
Tesla said on Jan. 2 that it delivered 90,700 vehicles during the fourth quarter, shortly before analysts had expected. The company said at the time that it delivered 13,500 Model S sedans, 14,050 Model X SUVs and 63,150 Model 3s SUVs.
Tesla is predicting that Model 3 volumes will "grow substantially" by 2019 due to a full year of high production rates at its facilities in Fremont, California.
Tesla said it plans to start producing Model 3 vehicles in its "gigafactory" in Shanghai by the end of the year. The automaker says it plans to reduce the cost of production of Model 3s at the factory in China, a bold prediction that if successful, will help increase margins.
"We expect the capital investment per unit of capacity for this plant to be less than half that of our model 3 line in Fremont," the company said.
Tesla is also targeting cost cutting in the US and expects operating expenses to grow less than 10 percent by 2019. Automakers say the restructuring measures taken in the first quarter – which include layoffs this month – will cut costs by about of US $ 400 million. annually.
Tesla's first-quarter finances will reflect a unique cost of restructuring.
As a result, Tesla is optimistic that it will make a small profit in the first quarter if it can keep costs down, handle logistics and delivery challenges in Europe and China.