Tesla shares: what’s behind the ‘unexpected’ profits turnaround?

Company chief Elon Musk confirms Model Y production is ahead of schedule

Model Y
The new Tesla Model Y SUV
(Image credit: Frederic J. Brown/AFP/Getty Images)

Tesla shares skyrocketed on Wednesday after the US electric carmaker posted profits for the first time since March.

The “unexpected” turnaround in profits saw shares in the company rise by 21% to $307.12 (£238) in after-hours trading on Wednesday, crossing the $300 (£233) per share threshold for the first time since 1 March, the news site says.

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The financial report marks a significant turnaround for the Elon Musk-backed electric carmaker.

Tesla has never posted an annual profit and has “struggled with years of losses”, according to the BBC. In recent years, the losses have had the effect of fuelling “investor doubts and casting a shadow over the shares”.

It will be hoping its positive third-quarter results are a sign that it may soon record a profitable year for the first time.

Why the sudden surge in profits?

As reported by The Guardian, Tesla attributed its positive quarterly result to “cost control efforts”, claiming that its operating costs were at their lowest point since production of its Model 3 budget saloon started some three years ago.

The company stated that “improved production schedules” also played a key role in streamlining its operating costs, The Sunday Times says.

But as noted by Business Insider, Tesla “laid off” 7% of its workforce in January and a further 8% in March, all of which were part of the company’s cost-saving efforts.

What about the share price?

Positive quarterly results typically serve as a catalyst for share prices, but comments made by company chief Elon Musk can often send values through the roof.

During yesterday’s investor call, which was shared publicly on YouTube, the South African-born billionaire revealed that the upcoming Model Y, a budget electric SUV, is ahead of schedule and is now expected to launch in the US next summer, Electrek reports.

Musk also claimed that the new production facility in Shanghai, China, will begin producing Model 3s imminently, which should greatly boost its presence in the region.

“Until now, all of the cars Tesla sold in China were made in the US and shipped to China, making them subject to tariffs and the shifting winds of the trade war,” The Verge says. “Producing cars locally means Tesla should be able to sell more in China, even with a sagging Chinese economy.”

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