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Tesla’s Model 3 Set to Launch in July 2017

Tesla is continuing to impress the world with innovation; Tesla said that it will raise over $1.15 billion from a “new stock and senior notes offering,” giving Tesla the necessary funding to begin the development of the anticipated Model 3 electric car.

Tesla has received a well-needed investment as Chief Executive Elon Musk said that Tesla was “close to the edge” in terms of finances. Recent predictions made by Wall Street analysts suggested that Tesla needed to raise over $2.5 billion in capital to overcome its finance issues.

Wall Street has saved Tesla from potentially going bankrupt since they did not have enough funding. Since 2014, Tesla has had a negative cash flow and has posted quarterly profit only twice since Tesla has gone profitable.

At the end of 2016, Tesla had $3.39 billion in cash and other valuable assets, most of which came from a May stock offering, its SolarCity expansion, and close to $1 billion in “draws” on its credit facilities.

Tesla suggested that over $2-$2.5 billion will be needed in the first half of 2017 for capital expenditures, leaving very little capital for the development of the Model 3, which will begin, according to the company, in July.

To actually have enough capital to begin production of the Model 3, Tesla had said it will “shut down production at its California assembly plant for a week this month,” which would allow Tesla to add capacity to the production facilities for the Model 3. A Tesla spokesperson said that this pause would “allow Tesla to begin Model 3 production later this year as planned and enable us to start the ramp towards 500,000 vehicles annually in 2018.”

Last year, Tesla Chief Executive Elon Musk had told over 370,000 customers and investors who had paid deposits for the Model 3 that production of the vehicle will begin in July 2017. Sources have also disclosed information about Tesla’s plan to begin test-building the Model 3 on Feb 20.

But, many analysts and suppliers see Musk’s planning as very aggressive and ambitious, based on Tesla’s history of missing production quotas in the past. But, if Tesla is successful in starting test production of the Model 3, the company would be able to tell shareholders about production when it reports fourth-quarter results.

Producing a test-model before the earnings announcement will definitely excite the “fan base and Wall Street” according to a person familiar with Tesla’s plans who spoke on condition of anonymity.

But, Elon Musk himself had told investors that Tesla may miss the July 2017 startup target if suppliers are not able to meet the strict deadlines. The Model 3 is one of Tesla’s last resorts to pushing past other brands and “raise Tesla beyond a niche luxury player in the automotive sector.”

The popularity and enthusiasm of Tesla is partially due Elon Musk’s visions for the future of cars, space exploration and clean energy. But, these vision can definitely be farfetched. Skeptics are looking to Musk as he will attempt to fulfill his target of producing over 500,000 vehicles per year by 2018. Compared to Tesla’s current production rate, the company will need to increase production four to five times to meet Musk’s goal. In its fourth quarter of 2016, Tesla produced 24,882 vehicles.

The electronic car industry is struggling to carve its own niche in the automobile industry. In fact, “total sales of fully electric vehicles last year in the United States amounted to just 84,275,” according to data collected by the Electric Drive Transportation Association.

Tesla’s previous launches, which are being used to predict how the Model 3’s release will be, were lackluster; both were marked with production delays and initial quality issues. Many skeptics believe the Tesla will not be able to meet its July 2017 release target, but see the company being able to deliver in late 2017 instead. Either way, investors are looking to Tesla to answer for their previous launches and turn around Tesla’s negative growth.

Featured image via WikiMedia.

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