Tesla shares jumped 20% after Elon Musk predicted a sales rebound

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Tesla shares rose after the world's largest electric vehicle maker reported a “slight increase” in deliveries this year and a better-than-expected quarterly profit while forecasting a big jump in 2025.

The performance marks a turnaround for Tesla, which has endured several disappointing quarters as concerns spread about slowing global demand for electric vehicles. It is also caught up in the divisive political activism of its chief executive, Elon Musk, and a court battle to recover his $56 billion stock option package.

Musk predicted on Wednesday afternoon that car sales could rise 20 percent to 30 percent next year as cost-cutting cuts in prices for existing vehicles will boost demand.

He cited advances in self-driving technology and new products, including the autonomous “CyberCab” unveiled earlier this month. Musk also said that lower interest rates are reducing monthly financing payments and that this is having a meaningful impact on demand.

Tesla shares rose 20 percent on Thursday, adding more than $100 billion to its market value. That may give investors some relief, given shares are half their November 2021 peak, although the group is still the most valuable global carmaker.

Adjusted net income for the third quarter rose 8 percent from a year earlier to $2.5 billion, beating expectations of $2.1 billion, according to the Texas-based company's filing. Revenue rose 8 percent to $25.2 billion, slightly missing analysts' average estimate of $25.4 billion.

Profits were driven by a 2 percent rise in revenue from vehicle sales – which contribute four-fifths of group revenue – as well as a 52 percent jump in its energy generation and storage business and a 29 percent increase in its services arm, which includes its supercharger network.

Operating expenses fell 6 percent to $2.3 billion after cutting about 14,000 jobs, about a tenth of its workforce, earlier this year.

“Despite ongoing macroeconomic conditions, we expect a slight increase in vehicle deliveries in 2024,” Tesla said. “Plans for new vehicles, including more affordable models, are on track to begin production in the first half of 2025.”

However, Musk said Tesla is not developing the much-anticipated affordable $25,000 “Model 2.”

“We're not building a non-robotaxis model . . . a regular one [$25,000] The model is meaningless, it's completely irrelevant given what we believe,” he said.

“It's blindingly obvious at this point, that [autonomy] The future happens,” he added.

Instead, Musk said Tesla is focused on reducing the cost of existing models. Excluding government electric vehicle incentives, its CyberCab would cost about $25,000.

Kasturi has made a strategic pivot toward autonomous driving, artificial intelligence and robotics, predicting that these technologies will soon be Tesla's main source of revenue and drive its valuation. He recently unveiled a prototype for a new fleet of self-driving “cybercabs” that he hopes to have in production before early 2027.

However, there was a lack of engineering or financial details at a “We, Robot” event held at a Los Angeles movie studio, where Tesla's “Optimus” humanoid robot danced to Daft Punk and served beer to attendees — disappointing analysts and investors, and later sending shares down 9 percent.

Data from the third quarter offered more optimism. Tesla said Cybertruck production reported a positive gross margin for the first time — after production delays and recalls — and is the third best-selling electric car in the U.S. behind its Model Y and Model 3. The truck factory will begin production by the end of next year, for which Musk said there was “ridiculous demand.”

Earlier this month, Tesla reported that deliveries rose 6.4 percent to 462,890 vehicles worldwide in the third quarter, boosted by Chinese sales that offset weak demand in Europe. It retains its position as the top electric vehicle maker ahead of China's BYD.

Analysts on Wednesday also flagged an improvement in Tesla's gross margin, which expanded to 19.8 percent in the quarter from 17.9 percent in the same period last year.

The closely watched financial metric was flattered by $739mn in revenue from regulatory credits, which it sells to other manufacturers that do not meet production-related emissions targets for electric vehicles. It was the second highest after a record $890mn in the second quarter.

Tesla also gave an update on the number of Nvidia H100 graphics processing unit chips installed at its Texas manufacturing plant that are used to train AI systems for its self-driving technology, known as FSD. It said it has 29,000 installed in a cluster at Gigafactory and will grow to 50,000 by the end of October.

Musk has been controversial for his strong support of Republican presidential candidate Donald Trump. He is giving $1 million a day to registered voters in swing states who sign a petition supporting free speech and the right to bear arms.

In return, Trump promised to make Musk the head of a “government efficiency department” that would advise on cutting costs, bureaucracy and regulations, a position that could benefit his other companies, including SpaceX and social media network X. However, those political activities will draw the ire of Democratic candidate Kamala Harris if she wins.