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Tesla About To Spend Big On Model 3

A Model 3 is parked in front of the Gigafactory.A Model 3 is parked in front of the Gigafactory.
A Model 3 is parked in front of the Gigafactory.Fortune/Katie Fehrenbacher

As it moves closer to launching its Model 3 car by the end of next year, Tesla Motors will soon start to spend heavily to make enough cars for its customers.

In its second quarter earnings on Wednesday, the company said that its operating expenses over the next two quarters would increase so that its annual operating expenses would rise around 30%.

Tesla plans to spend about $2.25 billion on capital expenditures this year to be able to get its first Model 3’s to customers late next year and to make enough of the cars to meet the large demand.

Earlier this year, Tesla opened up reservations for the planned $35,000 car, and quickly racked up close to 400,000 reservations.

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Tesla has been planning on making the lower cost car since the company was founded. Tesla’s three other cars have been much higher-end luxury electric vehicles.

Tesla is building a massive battery factory outside of Reno, Nev. so that it can make batteries cheap enough to power a $35,000 car. The company says the battery factory will make enough batteries by 2018 to power 500,000 cars.

To take a look inside Tesla’s Gigafactory watch our video.

Tesla’s revenue in the second quarter rose to $1.27 billion, from $954.98 million from the same quarter a year earlier. But losses also grew to $293.19 million in the quarter, much more than the $184.23 million it lost the year before.

The loss, which equaled $2.09 a share using generally accepted accounting principals, was bigger than analysts expected. The loss excluding certain expenses was $1.06 a share. Analysts expected an adjusted loss of 59 cents a share.

The company had operating expenses of $512.82 million for the second quarter, up from $383.56 million from the second quarter in 2o15. Capital expenditures for the quarter of $294.72 million were less than they were for the same quarter the year earlier, when they were $405.17 million.

Tesla raised $1.7 billion in a public offering earlier this year to help fund the launch and production of the Model 3.