Just about three months ago, Tesla CEO Elon Musk issued one of his characteristically optimistic and bold promises. Specifically, Musk boasted that Tesla would be able to turn a quarterly profit before the end of the year. Musk’s promise came in response to an article claiming that Tesla was bleeding money and in desperate need of a cash injection, Musk, as he’s prone to do, quickly took to Twitter and said: “Tesla will be profitable & cash flow positive in Q3 & Q4, so obviously no need to raise money.”
Tesla’s next earnings report isn’t until August 1, so we’ll know more about Tesla’s financial situation soon enough. In the interim, though, a new teardown of Tesla’s Model 3 suggests that Musk’s promise might actually hold water. After thoroughly examining Tesla’s mass market EV, Sandy Munro of Munro and Associates — a prominent auto and engineering consultancy firm — found that the Model 3 could prove to be incredibly profitable for Tesla.
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“The Model 3 is profitable, so I have to eat crow,” Munro said in remarks picked up by Reuters. “I didn’t think it would happen this way,” he said on Monday. “No electric car is getting 30 percent net, nobody.”
Incidentally, Tesla has said that it’s aiming for a profit margin in the 25% range for the Model 3.
Munro’s remarks are especially telling given that his firm has previously been rather critical of Tesla’s Model 3. This past February, for example, Munro’s first overview of the Model 3 detailed a laundry list of problems regarding the vehicle’s fit and finish.
If Tesla’s margins on the Model 3 are as high as Munro suggests, Tesla, as Musk promised, may be able to turn a profit sooner rather than later if the company can continue to ramp up Model 3 production. As it stands now, Tesla during the last week of June manufactured 5,000 Model 3 units and is aiming to bump up that figure to 6,000 units per week before the end of July. Some skeptics maintain that Tesla’s Model 3 production rate isn’t sustainable, so the company’s forthcoming earnings report will be particularly interesting.