Tesla faces Federal Bureau of Investigation probe over Model 3 numbers

Marcus Newton
October 28, 2018

Tesla is facing a criminal investigation into whether the electric car-marker misled investors by overstating production forecasts for its Model Three Sedan.

Wednesday's results showed that these analysts were wrong.

The company reported net income of $312 million on $6 billion for its automotive business.

But all of that hand-wringing turned out to be misguided.

The news comes as Tesla Chief Executive Elon Musk faces pressure to deliver consistent production numbers for the Model 3, seen as crucial to its profitability and ability to be a high-volume vehicle manufacturer. That ramp-up is now largely over, so Tesla is generating cash, not consuming it.

Tesla was under pressure by investors, citing the Company's profitability issue in the first half of the fiscal year.

The Model Three is a key part of Tesla's plan to expand from a niche player in the luxury segment to a vehicle maker with broader appeal. "And so Tesla had a good day, and I think Tesla has a lot of upside".

Following a surge of orders past year, it struggled to meet manufacturing targets and deliver cars to customers.

Tesla's strategy has been to attack the problem in stages.

But Tesla doesn't want to build another factory.

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Higher tariffs have hit demand for Model S sedans and Model X crossovers imported into the country.

The DOJ's focus on Model 3 production had not previously been reported. However, Musk said in May that Tesla would use cameras and radar instead of LiDAR sensors, which use laser light to measure the car's distance from other objects on the road. In other words, any Tesla owner will be able to share his or her vehicle just like they can share their house or apartment on Airbnb. But Wood's biggest hopes for the company concern software, and she worries those lofty mobility-as-a-service goals won't come to fruition if Tesla goes private.

It's important to note here that free cash flow is not the same as profits.

"Normally we'd tell investors to avoid reading too deeply into a single quarter's numbers, but this quarter really counted at Tesla".

Tesla CEO Elon Musk is now focusing on the next task: another profitable quarter. Up until last week, Tesla was selling "full self-driving hardware" on its site, which would give customers access to these capabilities as soon as the software become available and had regulatory approval. And the company experienced profits, however small, during each of these time periods as well. The results were supported by an increase in Model 3's new production as well as a drop in capital expenses.

Labor hours per Model 3 decreased by more than 30% quarter over quarter, falling for the first time below the Model S and X levels.

Tesla, which has never reported an annual profit, had been under particular strain after it ramped up spending for its launch of the Model 3, its newest vehicle aimed at a wider market. I wrote as much back in and again in. Tesla recorded a profit of $312 million (Rs 2,288 crore) for the third quarter of 2018, helped by deliveries of the Model 3 saloon rising to 56,000.

Analysts react to Tesla Inc (TSLA)'s cash generation and stronger margin performance for the third quarter. The luxury Model S outsold Mercedes.

Tesla's CEO remains confident regardless.

The Model Y, however, doesn't even appear to have a camera extending from the auto - we see nothing but the contour of the body in the teasers.

Other reports by MaliBehiribAe

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