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Happy Days at Tesla

Tesla flirts with sustainable profitability as sales soar
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Tesla just got closer to its first full-year profit.

The electric car company, which put together two consecutive quarters of net profits in the second half of 2018, did it again last year.

Tesla has never generated a full-year net profit, and 2019 was no exception. The company reported a net loss of $862 million last year.

But who cares? Apparently, not investors. They’ve been particularly thrilled about three fourth-quarter records: retail deliveries (112,100 vehicles), revenue ($7.4 billion) and positive cash flow ($1 billion).

Over the Hump?

Those numbers are a big deal for a company whose CEO Elon Musk is legendary for overpromising and underdelivering on launch dates, production targets and sales volumes over the past 16 years.

Now investors are beginning to think maybe the 16-year-old company is finally on its way to becoming a profitable carmaker.

Right now, it all hinges on the continued success of the Model 3 sedan (base price: $40,000). The car has been critical in moving Tesla beyond niche status. So far, it’s been doing exactly that.

Cue the Next Act

The high-roofed Tesla Model Y  (Image: Tesla)

Last year the Model 3 contributed more than 300,000 of 367,800 EVs Tesla sold worldwide. And that output came entirely from the company’s home plant in Fremont, Calif. In January, Tesla began retail sales in China of Model 3s made from its new factory in Shanghai.

Musk says Tesla is just two months from beginning U.S. deliveries of its next EV, the Model Y, a crossover variant of the Model 3. Judging by its repeatedly accelerated schedule, the Model Y will be Tesla’s smoothest launch ever.

Tesla also will begin producing the Y, which Musk predicts will outsell the Model 3, in Shanghai this year. Production of both models is supposed to begin in Europe in the second half of 2021 at a factory Tesla is building outside Berlin.

Maybe Yes, Maybe No

Musk predicts Tesla will sell more than 500,000 EVs in 2020. That happens to be the volume he says the company needs to turn a full-year profit.

It’s also the number Musk predicted Tesla would reach in 2018, and again last year. Maybe the third time is the charm.

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