Tesla Motors (TSLA) Model 3 Could Provide $20B/Year in Revenue

Tesla Model 3 TSLA Autopilot NASDAQ:TSLA

Tesla Motors Inc’s Master Plan – expanding electric-vehicle line and selling solar systems – will need tens of billions of dollars, according to CEO Elon Musk. Speaking at a formal opening of Tesla’s $5 billion Gigafactory in Nevada, Musk said that the plan could cost “tens of billions” of dollars over time and would likely require a “modest capital raise,” Reuters reported.

Tesla Motors Inc (TSLA) Model 3 Silver
Source: Tesla Motors

Tesla Gigafactory Opening

The automaker and energy firm broke ground on the Gigafactory in the Nevada desert two years ago. The factory will produce enough batteries to meet the company’s goal of building 500,000 cars annually by 2020. The new plant is being jointly developed with Japan’s Panasonic. Musk said that the factory could ultimately support 1.5 million electric vehicles a year.

The factory “will produce batteries for significantly less cost using economies of scale, innovative manufacturing, reduction of waste, and the simple optimization of locating most manufacturing process under one roof,” according to Tesla.

Musk, who visited the factory on Tuesday, said that he is not going to spend billions more right away. The chairman and chief executive officer visited the factory on Tuesday, Bloomberg News reported.

“Over time, this must necessarily be true,” Musk said. “Don’t quote me saying I plan to spend tens of billions right now because that would be incorrect.”

As of Tuesday, about 14% of the plant was complete, Tesla said. About 1,000 construction workers were on the building, which will cover the size of about 107 football fields.

Last month, Tesla Motors Inc made an offer to acquire SolarCity Corp (NASDAQ:SCTY) in a deal valued a in a stock deal worth as much as $2.8 billion. Musk is the largest shareholder in both companies, owning 19% of Tesla and 22% of SolarCity. He is also chairman of SolarCity.

Model 3 Could Provide $20B/Year in Revenue

Musk said that Tesla’s Model 3 car could generate $20 billion in revenue per year and an annual gross profit of about $5 billion, CNBC reported.

The Model 3 will be priced from around $35,000. The company plans to produce as many as 500,000 cars per year before 2020.

“Things are on track to be able to meet the Model 3 cell production timing in the middle of next year,” Musk told reporters.

The Model 3, an all-electric four-door compact sedan, was unveiled by Tesla on March 31. The electric car is expected to deliver an all-electric range of at least 215 miles (346 km). So far, the company has received almost 400,000 pre-orders for the Model 3.

Global Equities Research’s Trip Chowdhry said that the Gigafactory is valued at $50 billion. Chowdry added that “the Nevada subsidies make sense if Tesla Motors Inc generates revenues of $100 Billion in 20 years, which he suggests to use as a data point to value the Nevada factory.”

At Tesla’s 2016 annual shareholder meeting held May 31 at the Computer History Museum in Mountain View, California, Musk said the “Gigafactory battery cell production will be the best in the world, by far” because current battery production technology is optimized for creating batteries for consumer electronics. The Gigafactory will help in refining the technology for building lithium-ion batteries for EVs.

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