By Heather Somerville 

Tesla Inc. extended its profitability streak in the third quarter and promised global production increases in the latest sign the coronavirus pandemic has done little to dent Chief Executive Elon Musk's push to take electric vehicles mainstream.

The Silicon Valley car maker on Wednesday posted a net profit of $331 million for the three-month period ended Sept. 30. It marks Tesla's fifth-consecutive quarter in the black and keeps the company on track for 2020 to be the first calendar year of profitability after years of losses.

The company forecast significant production growth next year, with plans including the roll out of its all-electric semitrailer truck, more cars coming out of its China factory and its newest plants in Berlin and Texas starting to make vehicles. The aggressive ramp up puts Tesla a step closer to achieving the global footprint Mr. Musk has long sought.

Tesla also revived a pre-pandemic target to build at least 500,000 vehicles this year, which Chief Executive Elon Musk laid out in January, an increase of at least 36% from last year. Tesla hadn't formally withdrawn that guidance, but until now had largely ignored the projection that seemed improbable at the onset of the pandemic, when it temporarily shut down its lone U.S. factory as local health officials worked to contain the spread of the coronavirus.

"While achieving this goal has become more difficult, delivering half a million vehicles in 2020 remains our target," the company said. Reaching that lofty sales level will rely on building more cars at its Shanghai factory, Tesla said, as well as further improvements in logistics and delivery.

Earlier this month, Tesla reported record car sales for the third quarter, with 139,593 vehicle deliveries in the period, suggesting the target of 500,000 deliveries for the year was in reach.

Tesla posted a record $8.77 billion in revenue for the quarter, a 39% jump from a year ago. Analysts surveyed by FactSet expected sales of $8.28 billion.

The company was buoyed by efficiencies in manufacturing, including lower labor costs at its production facility in China, as well as growing demand in that country for electric cars. Its ability to sell emission credits to rivals to meet regulatory requirements has padded the bottom line.

Shares were up more than 3% to about $438 in after-hours trading. Tesla shares have roughly quintupled since the start of the year.

Tesla has been trying to cut costs and build cars more efficiently in part to reflect a shift in customers that are increasingly buying its more-affordable Model 3 car and Model Y sport-utility vehicle, rather than the higher-priced models that would contribute a larger profit. The company said the factories in Texas, Berlin and Shanghai would all produce Model Y vehicles next year.

"We expect our operating margin will continue to grow over time, ultimately reaching industry-leading levels," Tesla said in its shareholder report.

Mr. Musk's goal to turn electric vehicles from a niche market to having mass-market appeal appeared to gain traction in the second half of last year as Model 3 sales fueled massive growth, and after Tesla successfully opened its first overseas assembly factory in China, where the company has churned out cars with lower-cost labor. Tesla posted a $143 million profit in the third quarter of last year, and has stayed profitable since.

Mr. Musk has laid out a bold vision to be the world's largest auto maker, although the entrepreneur has been prone to hyperbole. At a shareholder event last month, he said he expects Tesla to build 20 million cars annually within the decade, and laid out a plan to use lower-cost batteries to make a $25,000 electric vehicle, which would be significantly cheaper than anything Tesla currently sells.

Tesla said it has bolstered production at its factory in Fremont, Calif., so that it can produce 500,000 Model 3 and Model Y vehicles a year, a slight increase in capacity. Its Berlin factory is under construction, and Tesla plans to move in equipment in the coming weeks, with production starting next year, the company said.

The latest quarterly profit will likely revive debate about Tesla joining the S&P 500 stock index. Tesla qualified for inclusion in the index after reporting a profit in the second quarter this year, but was left out in the latest update.

Write to Heather Somerville at Heather.Somerville@wsj.com

 

(END) Dow Jones Newswires

October 21, 2020 17:56 ET (21:56 GMT)

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