Published: Sun, October 28, 2018
Markets | By Terence Owen

Tesla says has not received subpoena on Model 3 production

Tesla says has not received subpoena on Model 3 production

Musk's penchant for courting controversy with his erratic tweets had put intense pressure on Tesla to convince Wall Street that the company could produce Model 3 cars in a cost-efficient manner and turn a profit.

Tesla had disclosed on September 18 that it received a "voluntary request" for documents from the Justice Department.

But in both cases, these were investor lawsuits, not criminal investigations, and the DOJ clearly believes there's reason to suspect Tesla's plans for an aggressive 2017 ramp (it unveiled its own projected timeline in February 2017) crossed the line from "Elon setting aggressive goals" to "Tesla covering up evidence that should have been disclosed".

This story is developing and will be updated.

Regarding the Model Y, Tesla plans to use their planned factory China to not only manufacture the Model 3, but also the e-SUV, as a locally submitted application shows.

Federal Bureau of Investigation agents have reportedly been contacting former Tesla employees in recent weeks, asking them for testimony in the criminal probe against the automaker. As for cash flow, Tesla came out smelling like a rose. We are enormously proud of the efforts of the whole company in making it through this hard ramp and getting us to volume production.

"Even though Tesla is finally hitting its stride in many ways, the company isn't out of the woods yet", Jeremy Acevedo, Edmunds' manager of industry analysis said in emailed comments.

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During Tesla's October 24th earnings call, Elon Musk revealed that the company's upcoming Model Y is moving into production. The aim is to shift up to a million cars a year outside the US.

Tesla's free cash flow was reported at $881 million during the past three-month period.

However, after managing to just achieve self-imposed delivery and financial targets, the third quarter profit, coming before the end of the year is a real positive step for the electric auto maker that's working to increase demand for smarter and more energy efficient vehicles.

The Model 3 production had also delivered an unexpectedly high margin - more than 20 per cent - which means that the cost of production is coming down, and that augurs well for the roll-out of the "cheap" $US35,000 version of the Model 3.

Analysts thought Tesla was in trouble earlier this year because the company had been burning nearly a billion dollars a quarter in late 2017 and early 2018. The automaker acknowledged a "production hell" in the ramp up to build the Model 3 sedan, but said several times in 2017 that it could build 5,000 of the sedans by the fourth quarter of 2017.

While the third-quarter results were definitely "impressive", and spurred at least one upgrade to outperform at Wolfe Research, most analysts questioned whether the profit and robust cash flow were sustainable and can be repeated next quarter.

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