Tesla promised it would swing to profitability and positive free cash flow in the third quarter of 2018, and on Wednesday the company reported that it had achieved those goals in Q3.
Thanks to recent manufacturing changes that allowed Tesla to produce a higher volume of its latest car, the Model 3 electric sedan, Tesla reported GAAP net income of $312 million and free cash flow of $881 million.
In recent months, Tesla has solved major manufacturing bottlenecks, and increased production of its Model 3 electric sedans. The Model 3 was supposed to vault the company from a niche, luxury automaker to one that serves the mainstream.
Last week, Tesla began selling a midrange version of the Model 3, which gets fewer miles per charge and has a lower top speed than its long-range, higher-priced predecessor. The newest version sells for $46,000 before incentives. But Tesla has yet to offer the $35,000 version of the Model 3, which it promised as an accessible base model.
In the earnings update, the company noted that customers who are buying the Model 3 are not just in the market for a premium sedan. They are trading in vehicles priced at or below $35,000 when new.
The company's cash position increased by $731 million in the third quarter despite repaying $82.5 million of bonds, the company said. It expects flat or positive free cash flow next quarter as well, even with greater debt coming due.
The company said, "Our cash position should remain at least flat in spite of our plan to repay $230 million of convertible notes in cash during Q4."