Tesla Motors Inc. plans to raise $2 billion in order to support the production of its recently unveiled Model 3 sedan.
The automaker is about to sell an additional $1.4 billion of shares through a secondary stock offering and the rest, a total of $5,505,972 shares, will be purchased by its Chief Executive Officer, Elon Musk, via a stock option exercise; $2,777,901 of which will be offered to cover his tax burden.
The funds will be used to “accelerate the production of the Model 3,” according to a Securities and Exchange Commission filing.The electric car maker’s chief executive also said that the company aims to produce 500,000 Model 3 cars per year at its factory in Fremont, California by late 2018, which is two years ahead of earlier estimates.
Automobile manufacturers would consider Tesla’s build plan a demanding task, said Jessica Caldwell, a senior analyst at the auto researcher Edmunds.com. A typical auto plant can only make at least 200,000 car units per year, she added, and 250,000 at the most.
“Raising money is going to help them try to reach that 500,000 number, but a lot of people have doubts,” she said. “It seems like an unreachable goal,” she commented in a New York Times report.
Tesla only produced 15,000 units in the first three months of 2016. Aside from this, the car maker already experienced production difficulties in the past that delayed the delivery of the Model X for more than 18 months.
The electric automaker also lost two of its production executives as the vice president for production, Greg Reichow, decided to take a leave of absence, and the vice president for manufacturing since 2014, John Ensign, left the company too. This month, however, Tesla hired Peter Hochholdinger, a manufacturing executive from Audi, as its new production chief.
Meanwhile, the Tesla Model 3, was unveiled in March as the company’s first mass-market car with the capacity to run 215 miles on full charge, sold at $35,000 as an introductory price. In late April, the company already received $1,000 refundable deposits for about 400,000 Model 3 car units. However, as of May 15th, it only had 373,000 preorders following the cancellation of 8,000 customers and 4,200 duplicate orders which were cancelled by Tesla.
Aside from the newly introduced Model 3, Tesla also offers the Model S sedan, priced at about $75,000 and Model X, a seven-seater sport utility vehicle, sold at about $80,000.