Will Model 3 Be a Turning Point For Tesla Motors Inc (TSLA)

Tesla Model X

Tesla Motors Inc (NASDAQ:TSLA)’s  CEO, Elon Musk, this week made a very positive remark about the future of the company. He said Tesla would start making a profit when Model 3 enters full production, and when they are able to sell 500,000 cars every year, a target that they expect to reach in 2020. As to why Tesla is not currently making full-year profits according to U.S. accounting standards, Musk said they are investing heavily in their growth right now.

Musk notes that Tesla could be profitable if the company scaled back its aggressive growth strategy and that they have gross margins in the mid to high 20% range.

Mass market car

The Model 3 is a low-cost electric car that is designed for the mass market. It now seems that Tesla Motors Inc (NASDAQ:TSLA) banks on the Model 3 to unlock its profit potential. The Model 3 will start at $35,000. The company has not been able to post a full-year profit since its founding in 2003. However, Tesla has often reported growing sales of its flagship car, Model S, in the U.S. and abroad. It recently revamped Model S to give it an all-wheel-drive capability.

In addition to making profit predictions for Tesla Motors Inc (NASDAQ:TSLA), Musk also said that they are currently investing huge amounts of money to support the growth of the company. He said that they could be making a profit already if they were not investing greatly. A $5 billion Gigafactory in Nevada for battery cells production is one of Tesla’s major investment projects currently. The company expects the facility to address its battery shortage issues and also support production of low-cost cars – Model 3.

Impact in China

Tesla Motors Inc (NASDAQ:TSLA) revealed that sales of Model S fell in China in 4Q, mainly because of drivers’ concern over Model S plugging issues. The company said they were working to address the charging problem in China, but revealed that sales in the U.S. and Europe increased significantly, able to partially offset the impact in China.

New vehicle this year

As Tesla expands its geographical market and looks to the mass market with Model 3 in the next five years, the company plans to bring a new vehicle to the market later this year. Model X SUV is expected to hit the market in mid to late 2015.

(Reccommended: Is Tesla Motors Inc (TSLA) Hinting at an Upgradeable Car Future?)

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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