Tesla rips 12% gain as investors eye the plan for affordable EVs

Tesla (NASDAQ:TSLA) rallied late on Wednesday after the Austin-based company impressed investors on the margin line. The automotive ex-credits gross margin rate was reported at 17.1% to easily clear the consensus estimate of 15.1%. Operating margin was reported at 10.8% of sales to improve from last quarter’s mark of 6.3%, and top last year’s mark of 7.6%.

On the earnings conference call, CEO Elon Musk took a victory lap over what he said was a record quarter. He noted that Tesla (TSLA) just produced its 7th million vehicle. Musk said more affordable models will be produced by Tesla (TSLA) in the first half of 2025. He expects vehicle production to increase by 20% to 30% in 2025. Cybercab production is anticipated to be scaled up aggressively in 2026. Regarding autonomy, Musk said miles-per-intervention metrics continue to improve, and the company thinks FSD will exceed human-level driving safety by Q2 of 2025. Ride-hailing is expected to be live in Texas and California next year.

Musk said the future of Tesla (TSLA) is autonomous when answering a question if a mass-market $25K vehicle would be introduced. The implication is that the Model 2 will not resemble a typical car and may not have a steering wheel. The Tesla Semi was noted to be preferred by the PepsiCo (PEP) drivers taking part of the all-electric semi initiative.

On Wall Street, CFRA analyst Garrett Nelson reminded investors that expectations were low heading into the release after four consecutive bottom-line misses and a Robotaxi Day event that left investors with more questions than answers. Nelson said the key question is the sustainability of TSLA’s Q3 gross margin. He also thinks consensus estimates that assume nearly 80% EPS growth between 2024 and 2026 are unrealistically high. Wedbush Securities was more positive as usual. Analyst Dan Ives said with price cuts fully in the rearview mirror now, Tesla (TSLA) showed off its ability to expand its margins as the company continues its AI/FSD transformation over the coming years.

On Seeking Alpha, Victor Dergunov, Investing Group Leader for The Financial Prophet:The most significant takeaway is that Tesla’s profitability improved more than anticipated, which was a primary concern going into the report. Moreover, the substantial EPS outperformance implies that Tesla could continue improving profitability more than expected as we advance

Shares of Tesla (TSLA) were up 11.55% a 6:14 p.m.