Elon Musk gears up for Model Y crossover as Tesla makes second straight quarterly profit

Nathan Bomey | USA TODAY

Tesla is gearing up to begin making its next vehicle — an electric crossover called the Model Y — as it boosts production of its current vehicles, lowers prices and cuts costs.

With a debt payment of more than $900 million due within weeks unless the company's stock makes a sudden leap, Tesla is under pressure to improve its operations through cost reductions, faster production and increased sales.

The automaker said Wednesday that it made a profit of $139.5 million in the fourth quarter, up from a loss of $675.4 million a year earlier. It's the second straight quarter the company has made money after a string of brutal losses.

The quarterly profit will help Tesla as it saves up for the likely bond payment in March. CEO Elon Musk said the company has enough money set aside to make the payment.

He also made a surprise announcement at the end of an earnings call: Tesla's chief financial officer, Deepak Ahuja, is retiring and will serve as a "senior adviser" to the company.

Ahuja was a close lieutenant of Musk and this is the second time he has left the company. Zach Kirkhorn, the company's vice president of finance, will succeed him.

The reasons for the switch were not immediately clear Wednesday.

The company warned Wednesday that it will be hard to make a profit in the first quarter of 2019 as it enacts $400 million in cost cuts, which will deal an upfront dent to the bottom line. Those cuts represent about 7 percent of the company's global workforce.

But Musk said he's "optimistic about being profitable" in the first period.

Tesla's stock fluctuated slightly up and down in after-hours trading Wednesday. The shares had risen 3.8 percent to close at $308.77 during the day.

Musk said the company expects to make a profit every quarter after the year's first.

The company projected 2019 sales of 360,000 to 400,000 vehicles, which would represent growth of about 45 percent to 65 percent over 2018.

Although the Model Y is on the way, the Model 3 will have to carry the load this year.

Tesla projected first-quarter sales of the ultra-luxury Model S and Model X to fall "slightly" after customers rushed to buy those vehicles in the fourth quarter to qualify for the full $7,500 federal tax credit before it was slashed in half on Jan. 1. The company has reduced prices of all of its vehicles by $2,000 and ended production of lower-end versions of the ultra-luxury models.

Because of Tesla's success, the tax credit for its buyers will be slashed in half again halfway through 2019. That has added urgency for Tesla to introduce a cheaper version of the Model 3. The car was supposed to be offered at a starting price of $35,000, but that base model hasn't yet been offered.

Instead, it's selling for well over $50,000 in many cases. That has helped Tesla turn a profit for two straight quarters after enduring what Musk called "production hell" earlier in 2018, when the company's ability to make vehicles in high volume was called into question.

Improvements in manufacturing, including the hasty construction of a tent outside the company's Fremont, California, factory, helped speed production output. The company says it has learned from the process and will incorporate those lessons in its new plant under construction in Shanghai.

Tesla said Wednesday that it expects to make 7,000 Model 3 vehicles per week at a "sustainable" pace at its Fremont factory by the end of 2019. Meanwhile, the company expects to hit an annualized rate of more than 10,000 Model 3 vehicles weekly at its under-construction Shanghai factory sometime between the fourth quarter of 2019 and the second quarter of 2020.

The next vehicle in the company's lineup is the Model Y, which will share the same platform as the Model 3 to save costs. Tesla said that vehicle will "most likely" be made at the company's battery plant in Reno, Nevada. Pricing, styling and specifications haven't been revealed.

Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.