Tesla to raise $1.5bn to fund new Model 3 production
What's the story
Despite having $3bn in cash, Tesla will sell bonds to professional investors in order to raise $1.5bn for the production of its new Model 3 car. Initial production has already begun from last month and Tesla reported that it already has 518,000 orders for the vehicle. The price starts from $35,000 and the company plans to make 400,000 units next year. Here's more.
Reserves
Burning through its cash reserves
The US electric car manufacturer, which also dabbles in making batteries and solar panels, has been burning through its cash reserves at a rapid pace for some time now. According to observers, Tesla would end up depleting around $2bn this year. Hence it's now seeking more cash. The said bonds will be repaid in eight years. The interest rate is yet to be decided.
Tesla
This shouldn't be a problem
While Tesla slots on to meet its lofty target of producing 100,000 Model 3 cars, its founder's remark, that it would be "six months of manufacturing hell," looks over its shoulder. Tesla already enjoys market popularity, owing to the success of its Model S and Model X variants. So, it shouldn't be an uphill task for the firm to garner fresh funds.
Target
Why does it need the money?
Considering the fact that Tesla manufactured 84,000 cars last year and now has an ambitious target of producing 520,000 cars annually by 2018, fund raising shouldn't come as a surprise. The electric car market is getting crowded and Tesla needs to ramp up its production if it wants to survive. Reputation has got it this far but it won't tide it over.
EVs
No more hiccups
Volkswagen, Mercedes, and Jaguar Land Rover are slated to come out with high-performance EVs soon and Renault-Nissan is already ruling the affordable end of the EV market. Tesla has to deliver and needs all the help it can get. It had to slow down production in first half of this year due to battery shortage. Shenanigans, like this, in future, would cost Tesla dearly.