In a filing with the U.S. Securities and Exchange Commission, Tesla Motors Inc disclosed that it will spend about $1.1 billion in the third quarter on payments and other planned expenditures, Reuters reported. The electric car maker, which wants to acquire solar panel installer SolarCity Corp for $2.6 billion, might raise new cash to achieve its goals.
Elon Musk is confident that 80k – 90k drivers will find themselves smiling behind the wheel of a brand new Tesla this year but will he be smiling too? With costs high, Musk needs to find more cash to finance his vision. Morningstar analyst Dave Whiston believes that Tesla should think about a single, big equity offering that would give the automaker the cash it needs to fund its ambitious growth plan and protect itself from rough times.
Why Will Tesla Need Cash?
Tesla is finishing construction of its $5 billion Gigafactory in Nevada and ramping up for production next year of a mass market sedan, the Model 3. The company said in the filing 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.
The automaker spent $117.4 million on the Gigafactory in the first half. It plans to spend a total of about $520 million this year on the construction of the factory. However, the company warned in its previous quarterly filing that the cost of building and operating its Gigafactory could exceed the current expectations.
During the official opening ceremony of the Gigafactory, CEO Elon Musk told reporters that the company’s master plan – expanding electric-vehicle line and selling solar systems – will need tens of billions of dollars. The plan could cost “tens of billions” of dollars over time and would likely require a “modest capital raise,” Musk said.
In its latest filing, the electric car company also disclosed that it had repaid that $678 million credit line in July and intended to repay principle on $411 million of 2018 convertible notes in the third quarter.
“During the third quarter, we will be using substantial amounts of cash in connection with conversions of our 2018 Notes and we could pursue other actions to reduce our outstanding balance of convertible notes, which could require further outlays of cash,” Tesla said in the filing.
Tesla Motors Inc also missed its vehicles delivery target for the second quarter. The company produced 18,345 vehicles in the quarter, up 20% from the first quarter. The company delivered 14,370 vehicles, versus the 17,000 it expected.
The deliveries were lower “due to the extreme production ramp in Q2 and the high mix of customer-ordered vehicles still on trucks and ships at the end of the quarter,” the company said.
Tesla expects output to reach 2,200 vehicles per week in the third quarter and 2,400 vehicles per week in the fourth quarter. In total, the car maker expects to produce and deliver about 50,000 vehicles during the second half of 2016, approximately equal to all of 2015. The company has stated that it expects to deliver 80,000 to 90,000 this year.
“In total, 5,150 customer-ordered vehicles were still in transit at the end of the quarter and will be delivered in early Q3,” the company said in a statement.
Shares of Tesla Motors Inc are down 3.39% for the year.