Tesla plans US$1.5bn bond offer to fund production of Model 3 electric car

by BPVA on 07 August 2017

Tesla plans US$1.5bn bond offer to fund production of Model 3 electric car

Tesla Inc. (NASDAQ:TSLA) plans to raise about US$1.5bn in a bond offering to strengthen its balance sheet following the launch of its new electric vehicle, the Model 3.

The electric-car maker will sell senior unsecured debt obligations set to mature in 2025.

"Tesla intends to use the net proceeds from this offering to further strengthen its balance sheet during this period of rapid scaling with the launch of Model 3, and for general corporate purposes," the company said.

The news comes a week after the company said it may use debts to grow its funds as it seeks to ramp up production of the Model 3, its first mass-market electric vehicle with a base price of US$35,000.

Telsa has received an average of 1,800 advance reservations per day for the Model 3 since its launch in late July.

Chief executive Elon Musk said at the time of the launch that the company faces at least six months of “manufacturing hell” as it increases production of the Model 3.

Telsa expects to produce 1,500 Model 3 vehicles in the upcoming third quarter, 5,000 vehicles produced per week by the end of this year and 10,000 per week by the end of 2018.

At the end of June, Tesla had total cash on hand of US$3.0bn, compared to US$4.0bn the previous quarter. Total debt at the end of the period was US$8.10bn.

On the back of its production ramp, Telsa’s cash burn is expected to reach US$2bn this year.

The news came at the same time as five members of the Italian Tesla owners club claimed to have travelled a record distance of 670 miles on a single charge of the Telsa Model S.

The five drivers achieved the feat by using as little energy as possible by maintaining a constant speed, using low rolling-resistance tyres, not using air conditioning and trying not to apply the brakes.

Shares rose 0.05% to US$357.10 in US pre-market trading.