Tesla surprises with 3Q profit

Tesla Motors Inc (O:) reported its first quarterly net profit in more than three years on Wednesday, buoyed by almost $139 million in sales of clean vehicle credits, and Chief Executive Elon Musk said the company could also turn a profit in the fourth quarter. The company has also unveiled its low-priced electric variant Model 3 early this year, which is planned to ship in 2017.

Tesla, known for its high-end cars which sell for upwards of $70,000, is also working on a more affordable model at about half the price which is aimed at expanding the market for electric vehicles, as it seeks to boost the range between charges.

“Our current plan does not require any capital raise for the Model 3”, Musk said on the call. However, Musk recently indicated in a tweet that they no longer need to raise capital.

After 12 straight quarterly losses, Tesla has finally turned a profit.

Revenue was US$2.3 billion, up 145% from Q3 2015 and total Q3 gross margin was 27.7%, compared to 21.6% in Q2.

Tesla will have to beat the pace of those third-quarter deliveries if it wants to make its guidance for the full year.

Record deliveries helped to offset rising expenses for next year’s roll-out of the company’s mass-market Model 3 saloon vehicle.

According to Reuters, Tesla Motors signaled that it has considerably reduced costs for rolling out its high volume Model 3 sedan in 2017, but there are reasons to be skeptical.

It will likely take until, “summer 2018 to get to alien dreadnaught version one”, Musk said. Revenue more than doubled to $2.3 billion from $936.8 million for the same period past year, and far exceeded Thomson Reuters analysts’ consensus estimates, which forecasted $1.98 billion in sales.

Musk got his wish in the $139 million in sales that Tesla made for the quarter with fully electric vehicles.

The cheapest electric vehicle of Tesla is also subject to get a federal tax credit of $7,500 in the United States, which could make it a lot cheaper.

In the third quarter alone, income from ZEV credits amounted to $139 million – almost equal to what the company realized from selling those credits in all of 2014 says Cowen analyst Jeffrey Osborne.

Tesla CEO Elon Musk announced that the release of the Tesla Model 3 will be just as scheduled this coming 2017. Shares of the company soared 6.33 percent to $215.05 in after-hours trading on the news of the company’s better-than-expected earnings report. Tesla expects capital expenditures in 2016 to be about $1.8 billion as the company continues to focus on capital efficiency.