In a letter addressed to the company’s shareholders, Tesla’s (NASDAQ:TSLA) Chief Executive Officer Elon Musk and Chief Financial Officer Deepak Ahuja announced that the third quarter was a “fundamental turning point” for the company, as it can now can be called a mass production car company.
Tesla reported that over the three month period from July to September, the company has greatly increased its production. At the beginning of the quarter, five cars were manufactured each week; by the end of the same quarter, 100 cars were manufactured each week. Now, well into the fourth quarter, 200 cars are manufactured each week, a figure the company says is the critical threshold needed for Tesla to generate positive operating cash flow. In another month, Mush and Ahuja say Tesla will double production.
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The company’s third quarter results, released on Monday, showed Model S production to be accelerating as well, and caused shares of Tesla to rise the most in almost three months, 7.9 percent.
“The market is reacting more because results weren’t worse than the expectations,” Pacific Crest Securities analyst Ben Schuman said in an interview with Bloomberg. “They’re ahead in terms of Model S production in the third quarter, though by not by too much.”
As the electric car manufacturer increased production of its all-electric Model S sedan, Tesla reported a net loss for the period of $110.8 million, or $1.05 per share. The third quarter loss is not unexpected; Tesla posted a loss of $105.6 million in the second quarter, and Musk warned in September that the production was “slower than we had earlier anticipated.” However, the company did produce 350 vehicles during the quarter, and demand also rose from 11,500 to 13,200 over the period.
Revenue also declined, falling 13 percent from the year-ago quarter to $50.1 million. The results, though down from last year, beat the average analyst estimate of $45.8 million.
Even though the manufacturer will not meet its goal of producing 5,000 Model S sedans this year, the company claimed it is still on track to produce 20,000 units in 2013. Furthermore, by the end of the current quarter Tesla said it will be halfway to its targeted 25 percent gross margin.
“Overall, Tesla is past the point of high risk,” said CEO Elon Musk in the company’s earnings conference call. “I feel as though we’re through the valley of death.”
Following the third quarter results, the company reaffirmed its forecast for full-year sales of $440 million.