Tesla Motors Inc will soon more capital to finish construction of its $5 billion Gigafactory, ramp up the Model 3 production, and to fund the planned acquisition of solar panel installer SolarCity. Tesla CEO Elon Musk wants to cut costs and boost productivity in the third quarter to impress investors, according to an internal email that Musk sent to employees. The email was acquired by Bloomberg. Musk said in his email that showing “at least slightly positive cash flow” would be “awesome” for fundraising, Fortune reported.
Morningstar analyst Dave Whiston believes that the electric car maker should think about a single, big equity offering that would give the company the cash to fund its ambitious growth plan and protect itself from rough times.
Tesla To Cut Costs in Q3
Musk urged workers to cut costs and deliver “every car we possibly can” to show positive cash flow in the third quarter. He belives that He thinks that this his final chance to show improved financial numbers before he tries to raise more money.
“The simple reality of it is that we will be in a far better position to convince potential investors to bet on us if the headline is not Tesla Loses Money Again, but rather Tesla Defies All Expectations and Achieves Profitability,” Musk wrote in an email sent August 29.
Last month, in a filing with the U.S. Securities and Exchange Commission (SEC), Tesla Motors Inc disclosed that it will spend about $1.1 billion in the third quarter on payments and other planned expenditures. The company said that it had $3.25 billion in principal sources of liquidity as of June 30, including $1.7 billion from a public offering in May and a $678 million credit line.
How Critical This Quarter is For Tesla?
The third quarter is crucial to Tesla’s future as the electric car maker is buying SolarCity for $2.6 billion and ramping up production next year of a mass market sedan, the Model 3, according to the Bloomberg report. If the SEC approves the SolarCity deal, shareholders at both companies could vote on the merger as early as October.
Tesla delivered 50,568 vehicles in 2015 and plans to ship about 80,000 this year. The company missed its vehicles delivery target for the second quarter. It produced 18,345 vehicles in the quarter, up 20% from the first quarter. But the company was able to deliver 14,370 vehicles, down from 17,000 cars it expected to ship.
Musk wrote in his email that “I thought it was important to write you a note directly to let you know how critical this quarter is. The third quarter will be our last chance to show investors that Tesla can be at least slightly positive cash flow and profitable before the Model 3 reaches full production.”
In addition, Musk wrote that Tesla Motors Inc “will need to raise additional cash in Q4 to complete the Model 3 vehicle and the Gigafactory” in Nevada. The automaker spent $117.4 million on the Gigafactory in the first half, and plans to spend a total of about $520 million this year on the construction of the factory. The company warned in its previous quarterly filing that the cost of building and operating its Gigafactory could exceed the current expectations.