Tesla reports profit as issues stabilise


The company's shares, which fell as much as much as 4.7 percent in morning trade, pared most of their losses to trade down 0.3 percent at $307.77.

Tesla shares fell in after-hours trading Wednesday after the company reported fourth-quarter profits that fell short of analysts' expectations.

Elon Musk, the company's CEO, said earlier this month that the company was targeting a small profit this quarter. Musk pledged at the time it was a sign of more healthy earnings to come.

It said it produced the most Model 3 vehicles ever in December and that the cost of producing the vehicle continues to decline. On Wednesday, the company sought to reassure investors that the manufacturing woes are over.

With 63,359 Model 3s delivered to customers in North America alone in the fourth quarter of 2018 and reports of high demand already in Europe, Tesla says it has improved its assembly line to the point that it will be able to sustain production of 7,000 units a week at its Fremont factory by the end of 2019.

The changes concern only the Tesla Model S and Model X: 75-kWh battery versions of both vehicles are no longer offered, making the 100-kWh battery pack the sole option for these cars.

"It is critical that we continue this trend so that we can keep increasing the affordability of Model 3 while retaining a sustainable level of profitability", the company said.

Bullish Tesla analyst Colin Rusch of Oppenheimer told clients Monday that "Model 3 demand, production, and margin" will be the primary drivers of the stock this year.

Earlier this month, Tesla announced layoffs impacting about 7% of its full-time workforce. As we saw with the Model 3 unveiling, it could be some time for the truck to make it to production and into driveways.

It may be similar to the Model 3, but Musk said to expect 50 percent higher cost - even double. Investors keep a close eye on Tesla's cash stores because the company has hundreds of millions of dollars in debt payments due in the coming months.

"Zach's incredibly talented and has made a huge contribution to Tesla over the years", Musk said, adding that his new CFO was "a very well-known quantity to the whole team and has the respect of the whole team".

Looking forward, Musk said he's "optimistic about being profitable" in the first quarter of 2019 - but "not by a lot".

Based on management's previous commentary, results for the fiscal first quarter could also come in soft.

To post a profit, Tesla will have to "successfully execute on many fronts including handling logistics and delivery challenges in Europe and China", the company said. Reads the letter further: "Additionally, this year we will start tooling for Model Y to achieve volume production by the end of 2020, most likely at Gigafactory 1".