Tesla promises profits in the second half of this year — if it can meet Model 3 production goals

Key Points
  • Tesla said that it would become profitable in the second half of 2018, if it can hit Model 3 production goals, making 5,000 of the electric sedans per week.
  • Tesla CEO Elon Musk previously tweeted that the company would be profitable, and cash-flow positive, in the second half of 2018.
People inspect the Tesla Model 3 as it sits on display at the Los Angeles Auto Show last December.
Justin L. Stewart | Anadolu Agency | Getty Images

Tesla says it will be profitable in the second half of 2018 if it can meet its Model 3 vehicle production and delivery goals.

"If we execute according to our plans, we will at least achieve positive net income excluding non-cash stock based compensation in Q3 and Q4 and we expect to also achieve full GAAP profitability in each of these quarters," the company wrote in a letter to shareholders accompanying its first-quarter earnings report on Wednesday.

The company also reiterated its plans to produce 5,000 of its all-electric Model 3 sedans per week by the end of June. It will make its lower-priced base model available to drivers only after that goal is achieved.

Currently, Tesla is delivering a long-range rear-wheel drive Model 3 to customers for a starting price of $44,000. Others have been waiting for the short-range rear-wheel-drive version of the Model 3 which CEO Elon Musk promised for a base price of $35,000.

Tesla shares rise as first-quarter earnings beat
Tesla shares rise as first-quarter earnings beat

In April, Tesla reported that it had missed its first-quarter production and delivery targets for the Model 3. The company produced 2,020 Model 3s in the final week of the first quarter, short of its goal of producing 2,500 Model 3 sedans weekly by the end of March.

To increase its Model 3 production rate, Tesla will run its Fremont, California, factory around the clock, according to a leaked e-mail that Elon Musk sent to employees. Adding employees and shifts and paying more overtime to workers will raise costs for Tesla, another challenge to the Model 3 margins.

Tesla advised shareholders in its earnings statement today that it will plan to halt production at its Fremont factory for a total of about 10 days this quarter in order to improve processes so it can achieve its Model 3 production goals. It has already shut down production for a brief period in April.

Tesla's statement said that before that recent shutdown, it was able to produce 2,270 Model 3s in seven days, a new record for the company.