Tesla (TSLA) is raising $1.5 billion to expand Model 3 production

08 August, 2017, 00:45 | Author: Delbert Rhodes
  • Tesla Inc. - TSLA - Stock Price Today - Zacks

The Tesla Owners Club Italia team managed to make a 1,078km/669.8 miles trip with a single charge in their Model S P100D.

In a statement on Monday (7 August), the USA carmaker said it will raise the funds via the selling of bonds to institutional investors. It would be the company's first sale of non-convertible bonds, according to data compiled by Bloomberg. Investors desperate for income have depressed the yield gap between single-B-rated junk bonds and United States Treasury bonds by almost 2 percentage points over the past year, to 3.59 points, according to Bank of America Merrill Lynch. That's still a good place to be from a cash perspective, and it nearly guarantees that Tesla will sell all of the vehicles it can produce not only this year, but also for all of 2018.

Analysts already are speculating whether Tesla will need to raise more cash before the year is over. The Model 3 starts at $35,000, roughly half the cost of the base Model S sedan, and has racked up nearly half a million net reservations since the company began taking refundable deposits past year. The carmaker plans to make 500,000 vehicles in 2018 and a million in 2020.

Tesla has increased the value proposition of the Model X in other ways, too. So as Tesla ramps up production over the next two years to deliver the Model 3 to those hundreds of thousands of people who preordered the vehicle, we're going to find out exactly what those masses think about this pared-down look. Chief Executive Elon Musk told analysts last week on Tesla's earnings call to expect debt rather than an equity tap.

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But how does the Tesla Model 3 stack up against, say, the Volvo S60 - a vehicle that received a 5-star rating in all safety categories?

When Tesla first introduced the Model X, Elon Musk said that it would cost about $5,000 more than a similarly equipped Model S. If you look at current pricing, this statement remains untrue. "Obviously, that's like the promised land right there". With one key risk eliminated, the big question is: Can Tesla, which delivered just 22000 vehicles in Q2, really produce 10000 vehicles/week within a year?

At the end of June, Tesla had total cash on hand of US$3.0bn, compared to US$4.0bn the previous quarter.

In March, the company raised about $1.4 billion through a stock and debt offering. Nearly $1bn was spent in the quarter to bring the Model 3 into mass production. After that comes the Model Y, a smaller crossover scheduled to arrive as soon as late 2019.


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