Tesla share price has increased by up to 20% following news that the electric car manufacturer posted a surprise profit during the third quarter of 2019.
The share price of Tesla surged to $307.12, reaching the $300 mark for the first time since March 1 after the company delivered a profitable third quarter following record deliveries and cost cutting initiatives.
Tesla reported on Wednesday a profit of $342 million, defying forecasts that it would suffer a net loss of up to $257 million. This was the first profitable quarter for the company since it posted back-to-back profits in the second half of 2018.
The company also reported an increase in its cash balance to $5.3 billion and a profit of $1.86 per share, contrary to analyst expectations for a loss of 42 cents per share.
Prior to this, Tesla had only posted profits twice since its initial public offering (IPO) in 2010, once in 2013 and another in 2016. Similar to 2018, the company posted profits when analysts expected another quarter of losses despite Tesla chief executive officer (CEO) Elon Musk promising that the company would be out of the red several months before.
In 2018, Tesla found it difficult to increase the production of its Model 3 sedan, the first car it designed more for the mass market, whose pricing starts at around $40,000. By the end of the year, the company appeared to have addressed manufacturing issues at its California factory.
This year, the company was able to expand its sales abroad and has invested in a manufacturing plant in China in the hopes of tapping into the country's billions of consumers.
In a letter to shareholders, Tesla wrote: "We have also dramatically improved the pace of execution and capital efficiency of new production lines. Gigafactory Shanghai was built in 10 months and is ready for production, while it was [about] 65% less expensive to build than our Model 3 production system in the US."
