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If Elon Musk wanted to gloat on Wednesday after Tesla's surprise, he certainly did not show it.
During a quarter when most analysts were still waiting at red ink, the electric car maker reported a net profit of $ 312 million – the first since the heavy spending two years ago for the launch and acceleration of the production of the very important Model 3.
Since then, he has spent $ 6.2 billion in cash in the form of operating losses and capital expenditures. But this quarter the exit has ended. Tesla generated free cash flow of almost $ 900 million, even after capital expenditures of $ 510 million, a much larger recovery than expected by investors.
It was a powerful statement from a company beset by Wall Street sellers and predictions of eventual bankruptcy for much of his life. Tesla's stock jumped 10% on the news, bringing its gains this week to 22%.
For Musk, the change in mood represents a certain degree of justification, especially after a recent self-induced crisis that has resulted in lawsuits from US regulators.
However, the stock price has not yet returned to its August level before Mr Musk shot himself in the foot, claiming he had the money to mount a buyout. In addition, the last quarter still leaves open the key question that the company faces: can it profit from the construction of a real mainstream electric car?
Musk is increasingly frustrated this year with what he sees as unfair press coverage and speculative attacks seeking to profit from a fall in Tesla shares. The reaction on Twitter and questions about a call for results with analysts six months ago – crowned by his tweet statement on a buyout – have left many investors angry.
On Wednesday, however, Mr Musk, who was recently repressed, read a text as he discussed the latest findings and responded cautiously to analysts' questions.
Toni Sacconaghi, the analyst whose financial interrogation six months ago led Mr Musk to denounce the "boring questions" of Wall Street, seemed to redirect the Tesla leader again, questioning him about the how he could hope to continue generating profits. Model 3, selling prices dropping around $ 35,000. It is the goal that Mr. Musk has set to make it a true mass vehicle.
This time, the answer could hardly have been more different. "The problem with issues of this kind and detail is that it's a rapidly changing situation," said Musk, before dismissing the petition with atypical diplomacy.
Yet the question is at the heart of the challenge ahead.
Until now, an expensive battery has kept the lowest price of a model 3 at nearly $ 50,000, although the company lowered the floor by $ 4,000 last week by introducing a battery with shorter autonomy containing fewer cells. Wall Street estimates that the autopilot software and other features have raised the average price of the vehicle to around $ 60,000, well above the target claimed by Musk.
With the recovery in volumes and lower manufacturing costs after an eventful first year, this high price allowed Tesla to bounce back on profits. The company generated a gross profit margin of more than 20% on Model 3, above the 15% forecast by Tesla – although Mr Musk admitted that this figure was cautious.
Next year, things will become more difficult. Mr Musk said he was still considering lowering the price of a model 3 to $ 35,000 over the next six months. It would depend on a smaller battery, whose volume should take three months.
Tesla now has to prove that it can generate a decent profit margin at much lower prices. The beginning of next year will also be more difficult in the United States, when the $ 7,500 federal tax credit granted to Tesla buyers will begin to disappear.
The beginning of model 3's overseas sales could help. Musk said Tesla would start delivering the Model 3 to Europe as early as March, with shipments to Asia shortly thereafter. The use of high-end buyers in these markets could mitigate the shock as US prices fall and Tesla attempts to reduce costs to maintain margins.
Breaking with his usual opening on the results calls, Musk also refused to discuss how Tesla would increase production at his car manufacturing plant in the San Francisco Bay area.
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On the peak of 5,300 models 3 per week managed by Tesla at the end of September, he predicted that the company could reach 7,000 per week with "very minimal" capital expenditures. Moving it further to the 10,000 target would require a major overhaul of its existing production lines, he suggested. But he added: "We are not talking about mass [capital spending]. "
Local production may start to support some of the load. Faced with the criminal tariffs in China, Tesla announced that it would submit plans, with partial local production next year of vehicles sold there. A European car factory will follow, said Mr Musk: "It's silly to make cars in California and ship them to Europe."
In the end, he predicts, the demand for Model 3 will be greater than the 500,000 Series 3 sold each year by BMW and less than the 1 million Volkswagen Golfs – a range that remains impressive compared to the 55,840 vehicles delivered at the last quarter.
But with the first seemingly unresolved production issues, falling prices and international deliveries about to begin, Musk's dream of having a mass-market electric vehicle on the mass market is beginning to appear a little more at your fingertips.
"Our goal is to produce electric cars that are accessible to everyone," he said. "We are probably in less than six months."
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