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Tesla's 'historic' quarter included gains in storage, solar

Tesla is on track to triple its 2018 energy storage deployments the company said in its third quarter letter to investors.

Tesla's third quarter is stoking hopes among investors that the company might be on a path to sustainable profitability.

Tesla increased both production and margins of its Model 3 electric vehicle, which was again the best selling U.S. car in September by a wide margin based on revenue.

While some analysts expressed concern that the quarter's performance could be short-lived because the company could just be selling its high margin cars to boost near term earnings, analyst Gene Munster at Loup Ventures told Reuters, "the company is on track to generate enough cash to meet its $1.7 billion debt obligations."

Though the news took a backseat to the company's EV business, Tesla also saw higher revenues and better profitability in its energy business in the third quarter, which might have been "the best quarter ever for solar," CEO Elon Musk told investors on an earnings conference call.

Tesla said most of its new solar energy orders now come from the its website and stores rather than through third-party channels, which has helped to "significantly lower our customer acquisition costs."

The company's energy division sells battery storage devices, such as the Powerwall, and residential solar systems, such as its Solar Roof product.

Tesla has increased Powerwall production in order to work through its order backlog and is rolling out new software features, including a Storm Watch feature, that will allow the home battery system to recharge in case of a storm forecast. Tesla said that as a result of manufacturing efficiencies and improvements to its installation processes, its energy storage gross margin improved "materially" in the third quarter.

Tesla is also prioritizing residential solar installations combined with its energy storage products, which the company says should improve revenues and profits. The company has "significantly" improved how much time it takes to install its energy products, according to its investor letter. 

There are almost 450,000 Tesla vehicle owners around the world. "Ultimately, we believe this group will become the largest demand generator for our residential solar and Powerwall business," Tesla said in its shareholder letter.

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