Tesla's expansion, acquisition could cause cash crunch

Automaker's growth may require enlarging its Bay Area factory.

Tesla Motors' plans to expand its vehicle production while acquiring solar-energy service company SolarCity will cause a pretty severe cash crunch, CNBC reports, citing an analyst note from Oppenheimer's Colin Rusch. Just don't tell that to Tesla Chief Elon Musk, who continues to take a full-speed-ahead approach to the future.

Rusch believes Tesla will need to raise as much as $12.5 billion by the end of 2018. The bulk of that requirement stems from the effort to integrate SolarCity with Tesla's stationary-power division. Through June, SolarCity had a net loss of $533.4 million on $308.4 million in revenue. Rusch has a 'neutral' rating on the stock.

Meanwhile, Robert W. Baird analyst Ben Kallo figured that the electric-vehicle maker will need a $1.5-billion cash infusion, via either debt or equity, by mid-2017, while other analysts estimated that $2.5 billion will be needed next year for the Model 3 launch and the build-out of Tesla's Gigafactory in Nevada, according to Bloomberg News. With Tesla having $3.25 billion in cash as of June 30, though, Musk is having none of it. He Tweeted last week that the company wouldn't need to raise any cash by the end of the year.
In fact, Tesla may be doubling down on its production plans, literally. The company wants to double the size of its Fremont factory in the San Francisco Bay Area to more than 9 million square feet, the Los Angeles Times says, citing documents filed with the city's planning commission. The factory, which was formerly run by General Motors and employs more than 6,000 people, would expand its workforce by 50 percent if the plans are approved.

Earlier this year, Tesla moved up its goal of producing a half-million vehicles a year to 2018 from 2020. The automaker agreed in early August to acquire SolarCity for about $2.6 billion. The deal received approval from the Federal Trade Commission (FTC) later that month. Full-speed ahead, indeed.

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