SINGAPORE (Oct 29): With numbers like these coming, you have to wonder why Elon Musk was so vexed by the short sellers. Because, in the same quarter the ­Tesla CEO indulged in that weird US$420 take­over episode, the electric car company actually generated very good results.

As promised, Tesla generated a GAAP (Generally Accepted Accounting Principles) profit of US$1.75 per diluted share. It also turned in positive cash from operations of almost US$1.4 billion ($1.9 billion), and generated free cash flow for the first time in eight quarters, to the tune of US$881 million. Working capital changes helped some, and capital expenditure was a bit light but still impressive. This enabled Tesla to end September with just shy of US$3 billion in the bank, reversing the steady rise in net debt (see chart).

Higher margins on the Model 3, its mid-sized, luxury, all-electric sedan, provided a significant boost. Even adjusting for the sale of zero-emission vehicle (ZEV) credits — an irregular top-up to Tesla’s earnings over the years — the automotive gross margin came in above 25%. It remains to be seen whether Tesla also sold other regulatory credits; it only discloses those in its 10-Q filing, and they have moved the needle substantially at various points in the past. Still, on the face of it, I estimate it made almost US$5,500 of pre-tax profit on each vehicle. In particular, R&D and selling, general and administrative costs were noticeably held down even as revenue jumped.

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