Tesla To Speed Up Car Production By Two Years
Electric car maker Tesla Motors revealed on Wednesday that it has accelerated its car production plans by two years, showing how the company is willing to invest even more money into aggressively growing, while potentially sacrificing earlier profits.
Tesla originally planned to make 500,000 cars—including the Model S, Model X and Model 3—by 2020. But it now says it will meet that goal by 2018.
The news follows a deluge of reservations for Tesla’s recently revealed mainstream electric car, the Model 3. The Model 3 won’t be shipped to customers until the end of 2017. Musk said on the earnings call that he could expect 100,000 to 150,000 of those cars to be made up by the Model S and X, while 300,000 to 400,000 of those cars could be made up by the Model 3.
Tesla new goal could be difficult for it to achieve considering the company has struggled producing the Model X, its electric SUV. The company acknowledged that meeting the new goal “will be challenging.”
Investors, however, were optimistic, sending Tesla’s shares (TSLA) jumping 5% in after hours trading on Wednesday to $234.
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To achieve the production goal, a five fold increase over the next two years, Tesla (TSLA) says it “will likely require some additional capital.” That could mean that Tesla could sell more of its shares in follow-on public offerings, draw down on more credit, or just significantly boost its capital expenditures.
Tesla said that the new production plan will mean that the company won’t likely be able to meet its goal to be “net cash flow positive for the year.” The company will also likely spend 50% more on capital expenditures in 2016 than previously forecast. But the company said that “investing to meet that demand is the best long term decision for Tesla.”
Tesla says it’s also speeding up its plans for the Gigafactory, Tesla’s massive battery factory under construction outside of Reno, Nev. Tesla says its remains on track to make its first battery cells at the factory in the last quarter of 2016 and will adjust “our plans there to accommodate our revised build plan.”
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Tesla confirmed in its shareholders letter that despite the delays with making the Model X, the company is still on track to deliver between 80,000 and 90,000 cars this year. However because of the Model X delays, Tesla said it produced 15,510 cars in the first quarter, which was below its estimated shipments for the quarter.
Tesla’s revenue for the first quarter of 2016 grew to $1.15 billion, from $939.88 million in the same quarter the year before. At the same time, the company’s first quarter loss widened $282.27 million from $154.18 million during the same period in 2015.
Tesla’s revenue met analyst’s expectations, while its loss beat analyst predictions.