Anyone reading this probably already knows the electric vehicle (EV) manufacturer Tesla (NASDAQ: TSLA) recently reported solid third-quarter results. Profits were better than expected and the company indicated that production would continue to grow. Investors celebrated by sending the stock 22% higher on Thursday.

However, the numbers alone do not tell the whole story. It takes an image to fully appreciate that Tesla may have just turned the profit corner.

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During the three months ending in September, the electric car company turned $25.2 billion in revenue into profits that amounted to $0.72 per share. Although revenue was below expectations, it was still 8% higher than a year ago. Meanwhile, operating income beat estimates by about $0.60 per share, a slight improvement over earnings reported in the third quarter of 2023. While total deliveries of 462,890 vehicles were just slightly below the expected 463,897, the figure was still significantly better than last year. third quarter count of 435,059.

However, these figures alone lack important context for investors.

In this case, the missing context is the evolution of Tesla’s results since early 2022 – when production and deliveries of its cheaper Model 3 cars began to ramp up in earnest – followed by substantial price cuts introduced early last year. You may recall that both have put increasing pressure on the company’s bottom line as production costs haven’t fallen as much as the cars’ non-negotiable sticker prices.

Although that may not be the case anymore.

As the chart below illustrates, thanks to a significant and purposeful reduction in production costs, Tesla’s gross profit per vehicle improved to an average of $34,544 per car in the third quarter, from $8,269 in the second quarter to $8,698 last quarter. It is the first consecutive growth by this measure since the first quarter of 2022. It is also the highest since the second quarter of 2023, when Tesla was in the middle of reconfiguring its production floors. What makes this achievement even more significant is the fact that the reduction in production costs was greater than Tesla’s price cuts for its cars.

There is one detail worth mentioning about the image above. That is, although neither significant nor significant different During the third quarter, revenue per vehicle in question includes regulatory credits and leasing revenue.

Anyway, Tesla’s car industry do appear to be making a major turn in profitability. In light of this new trajectory, investors can hope for income growth as they look to produce an even cheaper car. And Tesla itself can justify making more and bigger investments in greater production capacity.

Story continues