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Home / Business / Tesla makes a profit, as all eyes are on the China Gigafactory

Tesla makes a profit, as all eyes are on the China Gigafactory



A record number of vehicles delivered in the third quarter of 2019 was enough to help Tesla earn a modest profit, according to the Silicon Valley automaker's financial news on Wednesday. And with the Shanghai Gigafactory almost ready to start production of the Model 3, Tesla's most affordable car, all eyes are on China to see what kind of lift the automakers get in the world's largest electric vehicle market can.

Tesla reported a net profit of $ 143 million, with sales of $ 6.3 billion, a slight decline from the second quarter and a decrease of approximately $ 520 million compared to the third quarter of 201

8 Tesla's first quarter revenue decline since 2012, even though the company is attributing the decline to a tripling in the number of customers leasing their cars. (Tesla began leasing Model 3s in April of this year.)

These are the "lowest levels since the start of Model 3 production" – likely supported by the company's multiple downsizing and Elon Musk's "Nano" management. The company also benefited from $ 134 million in government credit and an undisclosed amount of money received from customers over the years for the "fully self-driving" version of Autopilot. Tesla ended the quarter with $ 5.3 billion in cash.


On October 2, Tesla announced the delivery of around 97,000 cars in the third quarter of 2019. Despite a sluggish start in 2019 (partly due to the fact that the company has shifted its focus to delivery of the Model 3 in Europe and China), Tesla has already delivered more cars this year than in 2019 overall. This is largely due to the popularity of the Model 3 – mainly because sales of the Model S and X have dropped by nearly 40 percent compared to the third quarter of 2018. Just to reach the bottom end of what Elon Musk did for the Year estimates that the company would deliver between 360,000 and 400,000 cars. However, for the first time since the end of 2018, Tesla made a profit with two consecutive profitable quarters. Musk has repeatedly predicted that the automaker would eventually emerge from the red area.

This is where the new Gigafactory comes into play. China is the largest market for electric vehicles and still offers Tesla a tremendous opportunity, despite the recent downturn in both the automotive market and the economy as a whole. So far, all Tesla cars sold in China have been manufactured in the US and shipped to China, subjecting them to customs duties and the changing winds of the war of commerce. The production of cars locally means that Tesla can sell more in China, even if the Chinese economy is shrinking.

In his letter to investors, Tesla says the factory in China is ahead of schedule and that the company is already producing model 3s "on a trial basis". According to Tesla, the test production of the Model Y, which should start in mid-2020, is above schedule.

The Shanghai Gigafactory of Tesla was not easy. The company spent years lobbying and negotiating to find a way. Only when China announced in July 2018 plans to ease the regulations that had previously required foreign car manufacturers to work with Chinese automakers, did Tesla sign a contract to build its third gigafactory.

After months of site selection and final negotiations, Tesla laid the foundation stone for the Shanghai Gigafactory in January this year. The factory was taking shape quickly, and construction workers were working around the clock to lift the huge building out of a muddy field. According to Tesla, the Gigafactory in Shanghai is now "ready for production". According to Tesla, the new Gigafactory cost 65 percent less than the US-built Model 3 production system, which is distributed between the Gigafactory in Nevada and the company's original factory in Fremont, California.

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