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Tesla posted a surprise Q3 profit

Tesla’s Q3 Earnings Show Large Profit

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Electric car maker Tesla has shown surprisingly good results for the third quarter of the year. Its shares rose by 20% and made a “surprise” profit of $342 million.

It came as an unexpected news as Wall Street was expecting a loss of $257 million. Investors rejoiced as this was the first profitable quarter for Tesla since June 2018. 

playbook 2019

While Tesla sales plummeted in the United States, the company has been focusing on the Chinese and the European markets, opening a plant in Shanghai and thus opening its first warehouse in Asia. 

China, Tesla’s new eldorado

2019 ends on a good note for Tesla. The electric car company has expanded in China where it opened its first warehouse in Shanghai. As for 2019, sales in China have risen 64% to $669 million.

In a public statement, the company shared that “Gigafactory Shanghai was built in 10 months and is ready for production, while it was [about] 65% less expensive to build than our Model 3 production system in the US.”

Moreover, Tesla’s founder Elon Musk confirmed to analysts that the factory would “become a template for future growth.” As it turns out, the factory should start producing a Model Y, a cheaper version of Model X SUV that could become ready for the market in June 2020.

“Musk & Co. are laser-focused on Europe and China for growth, while domestically, core demand is fading relative to other regions,” Wedbush analyst Dan Ives said to Reuters.

U.S. sales sharply plummeted

On the other hand, Dan Ives shared with Reuters that “U.S. growth will remain more challenging going forward.” While releasing its sales for 2019 Q3, Tesla confirmed that U.S sales fell to $3.13 billion. In 2018, U.S sales generated $5.13 billion.

Moreover, Tesla reported a drop of 8% in total revenue “to $6.30 billion, missing analysts’ average estimate of $6.33 billion, according to IBES data from Refinitiv.”,  confirmed Reuters.

As a response, Elon Musk said that the company almost reached its goal as it delivered 97,000 cars, almost as much as the 100,000 promised by Musk for 2019.

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Tesla will expand in Europe

Next stop for Tesla: Europe, where it is planning to launch its Model Y in 2020.  The cheap Tesla version will start at $39,000, much cheaper than the current model X,  which starts at $132,000.

As Model X, S and 3 have received the highest safety awards in Europe, investors showed confidence in Musk’s strategy for 2020 in Europe but doubts remain for the U.S market, as the price point is still high for consumers.

As a result, shares fell 3% on the day of the results at $318.66 and opened on Monday at $313.31 In Wall Street.

playbook 2019
Note: The opinions expressed in this article are the author's own and do not necessarily reflect the view of Alvexo on the matter.