Tesla's (NASDAQ:TSLA) third quarter was a major milestone for the company, thanks to fast-growing production and deliveries of its newest vehicle, the Model 3. Not only did Tesla's overall vehicle deliveries surge 221% year over year during the quarter, but the company also swung to a profit and racked up $881 million in free cash flow. Following a period of significant cash burn, it's difficult to overstate how crucial these results were.
And the company wants to follow its third quarter with more of the same. Management said in its third-quarter shareholder letter that it expects Q4 to feature profitability and a further increase in Model 3 deliveries. As Tesla's fourth quarter nears its end, the company is revealing its tactics to finish strong.
The end-of-the-year push
Tesla's aggressive efforts to boost fourth-quarter sales started ramping up last month, when CEO Elon Musk said the company had secured contracts with truck haulers and had even purchased some trucking companies to avoid the logistics challenges it faced in Q3. This move, Musk said, would allow U.S. customers who order a Tesla by Nov. 30 to take delivery before the end of the year.
Then Tesla said on Twitter earlier this month that it had vehicles in its inventory available for immediate delivery in the U.S.
In a move to further increase deliveries, Tesla said yesterday that it would open 11 new U.S. stores during the week, extending the company's retail footprint.
Finally, Musk said today that customers can even join a cancellation waiting list for a delivery this year. In addition, he said Tesla will give customers a full refund if the vehicle can't be delivered before Jan. 1.
End-of-the-year deliveries are important to both Tesla and its customers. The federal tax credit for Tesla buyers is set to be halved on Jan. 1, falling from $7,500 to $3,750.
It's no surprise that Tesla's making a big push to boost sales. While the company didn't specify how many Model 3 vehicles it expects to sell in Q4, it did say it expected both production and deliveries to increase. This implies more than 56,065 Model 3 deliveries during the quarter, putting combined Model 3 deliveries for the last two quarters well above the company's total vehicle deliveries in 2017 of about 103,000 units.
In addition, it is hoping that high-volume Model 3 deliveries will help the company achieve another quarter of profitability and positive cash flow. Management said in its third-quarter shareholder letter that it planned to use its cash flow to pay off $230 million worth of convertible notes during the period.