Tesla returns to profitability with Shanghai Gigafactory ready to roll
After announcing record production and delivery of its electric vehicles earlier this month, Tesla has shared its financial results for the third quarter and they too make for some positive reading. The company has returned to profitability on the back of significant cost-cutting, and says its new Gigafactory in Shanghai is ready to start producing EVs for the world’s most populous country.
The successes and failures of Tesla are significant from an environmental standpoint, as the company pursues its long-stated ambition to accelerate the world’s transition to sustainable energy. EVs do continue to make up tiny slice of the global car market, around one percent, but no electric vehicle in the US comes close to Tesla’s output, so it has a huge role to play in promoting the idea of zero-local-emission transport.
Balancing a ramp-up in production of its first mass-market sedan, the Model 3, with the pursuit of sustainable profitably has been a rocky road so far, to put it mildly. Tesla rounded out 2018 with back-to-back quarterly profits, the first in its history, but things haven’t gone quite as smoothly in 2019.
It started the year off with a monster $702 million loss in quarter one, following by a $408 million loss in quarter two. In figures released in early October, Tesla claimed a record in producing 96,000 cars and delivering 97,000. Some analysts predicted that this output would come at significant cost to the company’s finances, but the final figure should be a pleasing one for investors of the Silicon Valley automaker.
Tesla is reporting a $143 million net income for the third quarter, quite a turnaround from quarter two and one it attributes to a focus on “cost control” and the lowest operating expenses since it began production of the Model 3. It built almost 79,837 Model 3s for the quarter and delivered 79,600.
Meanwhile, it has added the finishing touches to its Shanghai Gigafactory after breaking ground in January, just 10 months ago. It says it is now "ready for production" and it is already putting together full vehicles at the facility on a trial basis, with a few regulatory items to tick off before starts production proper.
It feels like these are crucial times for Tesla. The Chinese market for EVs dwarfs that of the US, with more than 1.2 million electric vehicles sold there in 2018, compared to 361,000 in the US according to the World Economic Forum. More than half of these are produced by local electric vehicle maker BYD, but Tesla will be eyeing a slice of that pie as the Model 3s start to roll off the assembly line.
“China is by far the largest market for mid-sized premium sedans," reads Tesla’s quarterly report. “With Model 3 priced on par with gasoline powered mid-sized sedans (even before gas savings and other benefits), we believe China could become the biggest market for (the) Model 3.”