Tesla returns to profitability in Q3

The company has improved Model 3 margins despite lower average selling prices.

Tesla has posted its Q3 financial results, surprising Wall Street with a return to profitability despite lower-than-expected revenue.

The company achieved $143 million in net income for the quarter, with a 22.8-percent gross margin, both according to GAAP calculations.

"Despite reductions in the average selling price (ASP) of Model 3 as global mix stabilizes, our gross margins have strengthened," Tesla noted in its press release. "Additionally, operating expenses are at the lowest level since Model 3 production started."

The automaker has apparently succeeded in its cost-cutting strategies and reports a dramatic improvement in the pace of execution and capital efficiency for new production lines, bringing the Shanghai Gigafactory from ground-breaking to production-ready in just 10 months. The China plant was 65 percent less expensive to build than the Model 3 production line in the US.

The company says it is already building full vehicles on a trial basis in Shanghai. The Model 3 is said to be priced on-par with gasoline-powered midsize sedans in China, which is expected to become the largest market for the car.

The Model Y is said to be ahead of schedule in the push toward production, with a launch expected by summer 2020. Tesla also aims to begin building the all-electric Semi in "limited volumes" next year and will announce soon the location of its European Gigafactory for production in 2021.

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