Tesla Turns a Profit As Company Envisions AV Ride-Hailing

Tesla turned profitable in the third quarter, fulfilling a promise to make money in the second half of this year and saying it expects to become sustainable and self-funding.

For the quarter that ended September 30, the company reported net income of $312M for those three months, based on generally accepted accounting principles. It was the first quarter in the black for an auto industry superstar that is valued at about $50Bn despite an often volatile image. In last year’s third quarter, Tesla lost nearly $620M.

As it announced the results on October 24, the company also said it plans to introduce the Model 3 in Europe and China early next year and eventually manufacture it in both of those markets. In addition, CEO Elon Musk said he recently approved a prototype of the Model Y crossover vehicle for volume production in 2020.

The quarter was rocked by scandals, especially over Musk’s tweet that he had secured financing to take the company private. That later led to a Securities and Exchange Commission lawsuit and an $80M settlement under which Musk stepped down as chairman. The Justice Department also opened an investigation.

In announcing the results, Tesla cited growing sales and profit margins for the midsize Model 3, the model it’s counting on to become a mainstream automaker. It delivered 56,065 Model 3s to customers in the quarter, though its average weekly production of the cars was only 4,300, falling short of a goal of 5,000 per week. In the final week of the quarter, the company said it built 5,300.

After bleeding cash for years, Tesla ended the third quarter with $3Bn of cash and cash equivalents, up $731M and the company said it expects to be profitable again in the fourth quarter. On a webcast covering the results, executives gave more details about new and future technologies including a more advanced Autopilot processor and an autonomous ride-hailing service.

Hardware 3, the third-generation computer that Tesla itself developed for automation, is still on track to become available in the first quarter of next year, Tesla said. With about 1,000% higher processing capacity, it will be able to handle 10 times as many frames per second from cameras around a car and have more redundancy. Cost and power consumption remain the same.

The extra computing power will let Tesla deploy larger AI neural networks that that company has developed but hasn’t been able to offer in vehicles yet, said Andre Karpathy, director of artificial intelligence. They can more accurately analyze situations and make decisions, he said.

Musk also gave more details on a vision for how Tesla could beat Uber and Lyft in autonomous mobility. In addition to a system for owners to share their own AVs through an Airbnb-style service, Tesla will operate its own fleet where there aren’t enough owners who want to share, Musk said.

“The advantage that Tesla will have is that we’ll have millions of cars in the field with full autonomy capability, and no one else will have that,” Musk said.

Stephen Lawson is a freelance writer based in San Francisco. Follow him on Twitter @sdlawsonmedia.