Some quick math about Tesla achieving its first profit in Q3 2018:
Assuming Tesla can deliver about an average of 5,000 Model 3 vehicles per week in the second half of the year and that Model 3 can sell for an average price of about $55,000 (currently available Model 3 versions are priced between $49,000 and $77,000), the Model 3 could help Tesla generate about $7.2 billion in revenue on top of sales from other vehicles and business segments during the second half of the year.
While it's unclear what gross profit margin Tesla believes it can achieve in the second half of the year for Model 3, management has said it wants to eventually achieve a gross profit margin of 25% for the vehicle. Therefore, assuming Tesla can make some progress toward this target, achieving a Model 3 gross profit margin of 15% would translate to about $1.1 billion in gross profit from the new vehicle during this time frame.
And if the rest of Tesla's business can generate gross profit levels in line with what the company achieved in the second half of 2017, Tesla may generate about $2 billion in gross profit during the second half of the year.
Since Tesla's operating expenses recently have trended around $1 billion a quarter, Tesla may need to cut back its operating expenses to ensure it achieves profitability with $2 billion of gross profit in the second half of the year. Of course, Tesla is doing exactly that.
Profitability in Q3 and Q4, therefore, is possible. But this is based on an overly simplistic forecast using what many may view as aggressive assumptions. On the other hand, it's always possible that this exercise underestimates the contribution from Tesla Energy or proves to be too conservative with regards to certain assumptions made about the company's Model 3 program.
For instance, this imagined scenario may undershoot the Model 3 average selling price or the number of Model 3 vehicles Tesla can deliver in 2018. After all, Tesla recently said it believes it can achieve a production rate for Model 3 of about 6,000 vehicles per week in late August. Further, Tesla's energy business is seeing significant momentum -- a trend management believes will persist in 2018. Rising sales from this segment could have a materially positive impact on total gross profit.