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Elon Musk and Tesla Model 3
Tesla CEO presides over the handover of the first Model 3 cars in August 2017. (Tesla via YouTube)

Tesla shares jumped more than 10 percent in after-hours trading today after the controversial electric-car company posted a surprisingly positive quarterly report, including a profit rather than a loss.

Adjusted net income for the third quarter amounted to $312 million, which translated into earnings of $2.90 a share. Analysts had expected a loss of around 19 cents per share.

Total revenue hit $6.8 billion, exceeding expectations of $6.3 billion. And Tesla’s cash on hand increased by $731 million, even though Tesla repaid $82.5 million in bonds during the quarter.

That cash position could take some of the pressure off Tesla, which had been burning through its reserves by the billions during what CEO Elon Musk called “production hell” for the company’s Model 3 electric car.

Analysts had worried that Tesla would have to borrow more money to stay afloat. But Tesla said “our cash position should remain at least flat in spite of our plan to repay $230 million of convertible notes in cash” during the current quarter.

“We expect to again have positive net income and cash flow in Q4, and I believe our expectation will be for all quarters going forward … leaving aside quarters where we may need to do a significant repayment, for example in Q1 next year,” Musk said during a conference call with analysts. “But I think even in Q1 we can be approximately flat in cash flow by end of quarter.”

Tesla said it delivered 56,065 Model 3’s during the quarter, and produced 5,300 Model 3’s during the quarter’s last week. Average weekly Model 3 production was roughly 4,300 cars a week. Including Model S and Model X cars, total deliveries amounted to 70,000.

In its quarterly letter to investors, Tesla said it was a “truly historic quarter.”

The positive results came after Tesla and Musk weathered a rocky three months, highlighted by an aborted attempt to take the company private.

Musk’s claims about the financing for the deal (“funding secured”) led to wild swings in Tesla’s share price and eventually landed him in hot water with the Securities and Exchange Commission.

To avoid facing charges of securities fraud, Musk and Tesla worked out a deal with the SEC that requires Musk to step down from his post as chairman (while staying on as CEO) and submit his tweets to heightened scrutiny.

He and the company each agreed to pay a $20 million fine, and Tesla was required to name additional independent directors to its board.

Musk said credit for the positive results should go to Tesla’s employees as well as its customers, some of whom volunteered to help deliver Model 3 cars during an end-of-quarter rush.

“Maybe this has happened before, but I’ve never heard of it,” he said. “A case where a company’s customers actually cared about the future of the company so much that they volunteered their time to help the company succeed. That’s amazing. You just don’t see that, anywhere. It really chokes me up, actually.”

Tesla said its Model 3 production system has now stabilized, but it has an ambitious agenda ahead: The company said it would accelerate its manufacturing timeline in China by setting up parts of the production process there during 2019.

There’s also lots of work yet to be done on the Semi all-electric trailer-truck and the upgraded Roadster sports car. A crossover sport utility vehicle known as the Model Y and a Tesla pickup truck are on the horizon as well.

With all the fuss over the Model 3, the part of Tesla’s operation focusing on storage batteries and solar power systems hasn’t been getting much attention lately. But in today’s report, Tesla said its energy business has been “going through significant changes that led to higher revenues and significantly better profitability.”

“It may have been the best quarter ever for solar,” Musk said.

Energy storage deployments are on track to triple between 2017 and 2018, the company said. Tesla’s solar-roof system has had to go through revisions in design and installation procedures, but the company said it expects to ramp up production in the first half of 2019.

An hour after the quarterly results were released, Tesla’s shares were trading above $325, which represented a 13 percent rise above today’s official closing price of $288.50.

In other developments:

  • Musk said the production system still hasn’t gotten to the point where Tesla can make the $35,000 basic version of the Model 3 car profitably, but he expected that point to come by around February or March of next year. To bridge the gap, Tesla recently started offering a $46,000 midrange Model 3 (which was initially priced at $45,000).
  • Eventually Tesla plans to create a rideshare fleet that combines features of Uber, Lyft and Airbnb, Musk said. “There’ll be Tesla dedicated cars for ride-hailing, and any customer will be able to share their car at will, just like you share your house at an Airbnb,” he 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.”
  • Tesla should begin making Model 3 deliveries to Europe in late February or March, and to the Asia Pacific region by the second quarter of next year, Musk said.

Update for 5:30 p.m. PT Oct. 24: This report has been updated with Musk’s comments from today’s conference call.

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