Tesla has boosted its borrowing capacity by about $500 million under two credit agreements. These agreements came just two months after CEO Elon Musk tweeted that there wouldn’t be another debt requirement before the end of the year, according to Bloomberg.
Musk said something different
Tesla got a $200 million credit line with Deutsche Bank AG, as stated in a regulatory filing on Tuesday. There exists the potential of adding another $50 million to that agreement. The EV maker also increased another credit facility by $300 million, notes Bloomberg.
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In October, the EV firm said there wouldn’t be any need for the company to raise equity or borrow money this quarter. However, analysts had a completely different view on this, saying that the entrepreneur had very ambitious plans, and the company would need $2.5 billion to meet them. Tesla’s credit lines will reach about $1.8 billion with the disclosure made on Tuesday.
Morningstar analyst David Whiston said, “I don’t think it’s that shocking that over time Tesla needs more funding. It’s young and has enormous growth plans, so over time I would expect more equity raises and more revolver capacity.”
A Tesla spokesperson told Bloomberg that the company is not going to tell anything more about its plans to expand its credit lines beyond the contents of the filing.
Why does Tesla need cash?
In 2015, the company sold 50,000 cars, and now, it is aiming at half a million vehicles annually by 2018. It is expected that the Model 3 will account for most of those sales. The car will be Tesla’s first mass-market electric car and is expected to debut by the end of next year.
Tesla had just over $3 billion in cash at the end of the last quarter. It is expected that in the next few months, Tesla’s capital expenditures will increase significantly as it gets ready for the launch of the Model 3. The company has received more than 400,000 reservations for the car, and to fill those orders, it will need to be more aggressive than its usual production ramp-up, says Electrek.
Also the company is building a massive factory for battery production east of Reno, Nevada. Musk’s vision includes the production of energy-generating solar roof tiles that integrate with Tesla’s power storage units.
On Tuesday, Tesla shares closed up 2.99% at $208.79. Year to date, the stock is down more than 13%, while in the last six months, it is down almost 5%. The stock has a 52-week high of $269.34 and a 52-week low of $141.05.