Tesla rais­ing $1.5B to get Model 3 to masses

It plans to of­fer se­nior notes due in 2025 to for­tify bal­ance sheet.

Austin American-Statesman - - BUSINESS -

Tesla is rais­ing $1.5 bil­lion as it ramps up pro­duc­tion of the Model 3 sedan, its first mass mar­ket elec­tric car.

The com­pany said Mon­day that it planned to of­fer se­nior notes due in 2025 and would use the of­fer­ing’s pro­ceeds to fur­ther strengthen its bal­ance sheet dur­ing rapid scal­ing of the Model 3.

Tesla de­liv­ered the first 30 Model 3s to em­ploy­ees at the end of July.

At the time, CEO Elon Musk wor­ried some in­vestors when he warned that Tesla was about to em­bark on “at least six months of man­u­fac­tur­ing hell” as it at­tempts to get Model 3 pro­duc­tion to 5,000 cars per week by De­cem­ber.

But last week, Musk clar­i­fied his com­ments, and said Tesla should be able to over­come any sup­plier is­sues and other po­ten­tial ob­sta­cles. Musk said in­vestors should have “zero con­cern” about whether Tesla will be able to meet its goal of mak­ing 10,000 Model 3s per week by next year.

But that will cost money, and Tesla is burn­ing through cash at a rapid rate. The com­pany spent $1.2 bil­lion in the sec­ond quar­ter pre­par­ing for the Model 3’s ar­rival.

Tesla had $3 bil­lion in cash on hand at the end of the sec­ond quar­ter, but said it ex­pects to spend $2 bil­lion in the sec­ond half of this year.

When Musk was asked last week if he would like to raise more cash as a buf­fer, he said the com­pany was con­sid­er­ing a debt of­fer­ing but not an of­fer­ing of stocks.

The Model 3’s $35,000 start­ing price — half the cost of Tesla’s pre­vi­ous models — and range of up to 310 miles (498 km) could bring hun­dreds of thou­sands of new cus­tomers into the au­tomaker’s fold, tak­ing it from a niche lux­ury brand to the main­stream.

Tesla shares fell less than 1 per­cent to $356.25 in morn­ing trad­ing.

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