Tesla is reporting that the Model 3 has gross margins of over 20 percent, which has in part driven Tesla into profitability.

Ahead of the earnings webcast, Tesla released a shareholder letter detailing its third-quarter results. According to the letter, Tesla has turned a profit — and a sizable one. The letter reports a GAAP (generally accepted accounting principles) net income of $312 million, driven by strong Model 3 sales. The news has sent Tesla stock soaring in after-hours trading, running about 9 percent up at the time of this writing.

Tesla does acknowledge there were issues along the way to profitability — high scrap rates, logistical challenges, production ramp-up — and more important, an SEC investigation and eventual settlement based on Elon Musk's questionable announcement that he was investigating taking Tesla private via Twitter. But at the end of the day, Tesla says it delivered 56,065 Model 3s and 27,710 other models to customers in Q3. And its solar business is up, the company says, by 7 percent this quarter and 26 percent year over year.

With that major profitability hurdle dealt with, Tesla says production targets will remain the same for Model 3. It also says a target of 100,000 Model S and X units delivered by the end of the year is achievable. What's unclear at the moment is whether these production levels are sustainable, and whether Tesla can turn successive profits. But many were expecting another quarterly loss, based on a survey of the usual Tesla analysts, so the profit report is a surprise and a positive sign for the company's health after a very rocky year.

Additionally, Tesla says it increased its cash (and equivalent) reserves by $731 million, bringing that total up to $3.5 billion. That should be useful as Tesla plans to build its first Gigafactory overseas. Its planned facility in Shanghai, China, which aims for a capacity of 250,000 vehicles per year, is expected to cost $2 billion to build.

Total revenue more than doubled to $6.82 billion, beating analysts' average estimate of $6.33 billion.

It spent $510.3 million in quarterly capital expenses.

Tesla reported a profit of $311.5 million, or $1.75 per share, for the third quarter ended Sept. 30, compared with a loss of $619.4 million, or $3.70 per share, a year earlier.

Excluding items, Tesla had a profit of $2.90 per share.

Information from Reuters was included in this report.

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