Oppenheimer analyst Colin Rusch seems disagree with Tesla Motors Inc CEO Elon Musk who believes the electric car maker would not need to raise more money in the fourth quarter and early next year. Talking to CNBC, the analyst said that Tesla should raise more money in the second quarter “at the very furthest out.” Musk said in his recent tweet that the automaker won’t need to raise funds this year or next year, and will announce a “unexpected” product on October 17.
Why Will Tesla Need Money?
The company will need money for its future plans including Model 3 production. The electric car maker is going to raise additional cash, according to Rusch, who believes that the firm “would be prudent to raise capital sooner.”
Otherwise, Tesla could fall behind schedule on its plans for the Model 3, which is expected to go into production in summer 2017, Rusch said.
The firm expects produce between 100,000 and 200,000 Model 3 cars by the end of 2017. It has a larger goal of producing 500,000 cars, including all three of its models, by the end of 2018.
Prior to his Tweet on Sunday, Musk had said that his company would need to raise additional money by the end of 2016 to fund its plans. In a filing made with the Securities and Exchange Commission, the automaker reiterated its plan to raise additional funds by the end of the year.
Musk said in its tweet that he would like to “correct expectations that Tesla/SolarCity will need to raise equity or corp debt in Q4. Won’t be necessary for either.” He added that the companies “probably” would not need to do so in the first quarter of 2017, either.
Rusch also said that the company could use other ways to improve its finances.
“We have seen them do some asset-backed financing at SolarCity, as well as with Tesla’s inventories, and so we think they are going to continue to do that, along with expanding the lease program with the Model S and Model X,” he said. “And so as we go forward that is going to ease their cash needs, but they will need to raise capital.”
Earlier this year, Tesla had announced an offer for roughly $2.6 bn. The electric car maker is in the process of acquiring SolarCity. The deal has been facing some opposition from shareholders. Last month, four shareholders filed a lawsuit against the the company’s move. This may lead to delays in the transaction closing.
What Does Rusch Think About Tesla “Unexpected” Product?
On Sunday, Musk tweeted that Tesla is going to unveil an “unexpected” product on October 17. According to a report in Tech Crunch, the company possibly could introduce a new vehicle (many have been looking for a Roadster 2.0 launch) or announce improvements to its autonomous driving features. Looking at the company’s previous statements, it appears that it’s working on a new and improved self-driving technology. So it might announce something related to its self-driving tech.
Rusch thinks that the company’s “unexpected product announcements” in October will likely be an “incremental refinement of some existing product” rather than a big announcement, such as a new model.
“Typically with a bigger product, they would do a big media prep,” he said, “and plenty of lead time to make sure there was enough attention focused on a major announcement.”