Tesla Motors Faces Major Cash Flow Issue

Tesla Motors

According to the registration statement it filed with the U.S. Securities and Exchange Commission, Tesla will raise the money through a debt offering or equity.

Elon Musk, the electric car company’s chief executive officer, cautioned the company would need a minute equity capital raise for 2017. Tesla announced earlier in August that the second quarter closed with close to $3.25 billion cash. However, it repaid a revolving credit line of $678 million and would redeem another $422 million in convertible notes.

This means the company would have $2.15 billion left in cash. However, the company announced to analysts that it would spend $1.75 billion during the second half on equipment and plants to ensure the Model 3, with a price tag of $35,000, is ready for manufacturing and complete construction for the Reno gigafactory.

After all of this, Tesla would have about $400 million left at a time when it’s going through cash and is looking to attain Solar City, the money-hemorrhaging sister company.

University of Michigan Business Professor Erik Gordon said Tesla needs a plethora of large capital infusions to ensure its development plan can be carried out and Solar City can be overtaken.

Since the start of 2014, Tesla has posted regular operating losses – 14 straight quarters – and has had a negative cash flow.

According to Tesla, it’s key revenue source comes from vehicle sales, but deliveries have declined under the projections for the first half – 29,222 only.

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