Tesla Q3 Results: Increased Deliveries, Decreased Costs, and a New Gigafactory

After posting its first quarterly profit of the year, Tesla readies for a Full Self-Driving beta and a power increase update.

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Tesla shares shot up more than 20 percent during after-hours trading on Wednesday as the automaker announced the profitable and productive details of its third-quarter operations.

Besides shipping a record number of vehicles, Tesla announced its first profit since 2018—a slim net income of $143 million. More importantly, Tesla was able to achieve this number while generating $6.3 billion in revenue, only $23 million less than last quarter. During its quarterly earnings call, Tesla Chief Financial Officer Zach Kirkhorn attributed this to cost-cutting measures across the board, enabling Tesla to post a profit despite the average selling price of its Model 3 sedan decreasing overall.

Financials aside, Tesla has been busy worldwide. Just 10 months after breaking ground in China, the automaker has nearly completed construction of its Shanghai-based Gigafactory, which includes metal stamping, general assembly lines, and a paint shop. CEO Elon Musk also confirmed that a second building erected at the site will be used for battery cell and module production.

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Tesla plans to manufacture the Model 3 and Model Y in the U.S., China, and Europe.

Gigafactory 3 will be responsible for the production of the Model 3 and Model Y. Tesla says that the annual capacity of Model 3 production in China is 150,000 units, which is less than half of the theoretical capacity of its Fremont location. Model Y build capacity for either location has not been announced, however, Musk says that he believes the Model Y will outsell the S, X, and 3 combined.

Tesla subsequently announced that it was ahead of schedule in preliminary Model Y production and is slated to begin shipping the vehicle in summer 2020, a full quarter before its original planned launch.

Tesla also has its eyes on a fourth Gigafactory location in Europe and plans to announce its location before the end of the year.

As per usual, the automaker hasn't forgotten about improving its existing products. Musk announced that Tesla has matured Autopilot's Full Self-Driving suite to become "feature-complete" in the near future, and the automaker could deploy an early access beta to consumers in 2020.

Musk clarifies that "feature-complete" does not mean that an owner will be able to hop in and read a book while the car drives itself to work. Instead, he defines his own expectations of how the tech will eventually lead to unsupervised driving:

  1. A Full Self-Driving equipped Tesla will sometimes require supervision when driving semi-autonomously
  2. Tesla feels that the car is safe to be driven without supervision
  3. Regulators are convinced that cars can be driven without supervision

Tesla's Full Self-Driving suite relies on three separate parts in order to function properly, and Musk says that two of these are already solved. The first is high speed, which Tesla demonstrates by its vehicles operating semi-autonomously on the highway. Next is low speed, which is demonstrated by Smart Summon, a feature that Musk says has been used over one million times since its launch last month. Where Tesla must continue its development lies between these two scenarios, which involves winding roads and traffic signal recognition.

Lastly, Tesla's quarterly call included a surprise announcement that owners of Tesla vehicles would be seeing a power and range increase in an upcoming over-the-air update. Vice President of Technology Drew Baglino confirmed that Tesla has made some optimizations to its motor control which will enable a five-percent power increase for Model 3 vehicles and a slightly lower three percent for Model S and X. The update will also include minor supercharging improvements for Standard Range Model 3s.

While nearly all of the financials and outlooks in Tesla's third-quarter financial report look promising, it does put weight on the company's shoulders to outperform itself and finish off the fiscal year strong. In addition, Musk has put the company on a timer to finish out certain autonomy-related features which aren't exactly a short order. But should the company be successful, the money will likely follow.