Elon Musk hasn’t exactly enjoyed a good press for the last few weeks. Well, if not for his notorious tweets Musk would have been better off in recent times. However, the talismanic entrepreneur has a good reason to burry those unforgiving weeks, after his electric car company Tesla reported a rare quarterly profit on Wednesday.
To put things in perspective, Tesla’s quarterly profit in the third quarter of the current year is only its third quarterly profit in its decade-long history. The electric major reported profit of $312 Mn, compared to $619 million loss in the same period last year.
The turnaround was all thanks to good sales of Model 3, a third generation electric car on which Musk has placed considerable bet.
The profit numbers were presumably good enough to cheer up the concerned investors, who off late had been raising concerns over Tesla’s future. Musk, on his part, said in the conference call that he expects the company to stay profitable from this point onwards.
But will Musk’s prophecy really come true. Will profit be no more elusive to Tesla, a company that has been on the quest to search for profit since its inception. Well, to make profit less elusive, henceforth the electric car major will have to deliver profit in almost every quarter.
Investors will certainly look forward to Tesla’s next quarterly results with much more curiosity. If the company fails to deliver profit in the next quarter then it will surely douse down all the optimism. Above all, Musk’s prophecy about profitability may well then be perceived as a hogwash.
If Tesla, by the way, really wants to hold down to its profit then Model 3 presumably holds the key for the company’s fortunes. After all, unlike Tesla’s other offering, Model 3 is catered to the masses and is the one variant that is the cheapest. However, the challenge of bringing Model 3’s current price from $49,000 to originally intended price of $35,000 looks almost an impossible task.
That said, Musk will still have to make an effort to bring down the price as much as possible to spruce up the sales. He, however, will have to achieve this overwhelmingly difficult task without stretching the company’s balance sheet.
Lastly, Tesla will have to really push hard to ensure Model 3’s success in Chinese and European markets. The electric car major plans to introduce Model 3 in China and Europe early next year and thereby increasing the customer base in highly lucrative markets. Currently, Model 3 is sold only in the US and Canada.
This, however, would mean that the company will have to increase the production of Model 3 and increasing production can potentially prove another headache for Tesla.
All said and done, despite the historic quarterly profit, the road ahead for Tesla looks anything but smooth. The task for Musk and co is surely cut out and they have to be really good at it to bring ‘profit’ within the realm of possibility.
