With Tesla (NASDAQ:TSLA) beating expectations for fourth-quarter deliveries and bringing its China factory online earlier than anticipated, investors are responding by bidding up the company's stock.

In addition, at least one critic of the company is admitting the electric-car maker has made some important progress. General Motors' former vice chairman Bob Lutz has changed his tune regarding Tesla, going from predicting in late 2018 that the company was "headed for the graveyard" to acknowledging key improvement in the way Tesla is running its business.

Predicting the automaker's demise

The auto industry veteran has criticized Tesla for years.

In 2016, Lutz called Tesla's business "super lousy" and said the company's Model X SUV, thanks to its falcon wing doors, was "unbuildable." Further, he believed state requirements for automakers to build electric vehicles (EVs) would "jam" EVs into a crowded marketplace for the new vehicles. This would "generically depress the prices of electric vehicles," he predicted. 

A woman unlocks her Model 3 car with a Tesla app on her smartphone.

Tesla's Model 3. Image source: Tesla.

In late 2018, Lutz was particularly bearish on the company, saying that Tesla could never make money on the Model 3 and that the automaker was headed toward bankruptcy. 

Admitting Tesla's business has improved

But now that Tesla's market capitalization is approximately equal to Ford and General Motors' combined, Lutz admits that some aspects of Tesla's business have taken a turn for the better.

"I think they've achieved sort of a volume breakthrough with the plant in China opening and [given that Tesla is] selling a lot of Model 3s," Lutz said in an interview on Wednesday with CNBC.

Tesla recently brought its Shanghai factory online sooner than originally planned. The company said in its quarterly update on vehicle deliveries and production earlier this month that its production line at the new factory had demonstrated a production run rate of 3,000 units per week when "excluding local battery pack production which began in late December." 

"Model 3 is doing extremely well in Europe," Lutz added. "So, I think what's happening is that the Model 3, after a relatively slow start, is finally accelerating."

Lutz also complimented a change in the way Tesla CEO Elon Musk is running the company:

The encouraging thing to me about Tesla is, from Elon, there's less talk, less bluster, less 'here's what I'm going to do in six months,' and it seems like he's done what any other CEO or founder would do: He is focusing on the business, focusing on the product, and focusing on cost control. So, Tesla is finally being run like a normal business.

This risk profile of Tesla's business is markedly better

To Lutz's credit, Tesla was burning through billions of dollars of cash every year until recently. There was undoubtedly risk that the company could face major troubles if it ran up against unexpected detours. Indeed, as recently as May of last year, Tesla had to initiate cost-cutting efforts because it was reportedly 10 months away from running out of money.

But Tesla's production volume has since soared; the Model 3 has proven to be a blockbuster hit; and the company's cash flow has swung from negative to positive. Tesla now boasts trailing-12-month free cash flow of $872 million -- up from negative free cash flow of $4.1 billion in 2017 and negative $222 million in 2018.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.