Tesla will end up with a comfortable amount of cash by the end of the year — but 2018 could be a different story (TSLA)

pulse

August 2, 2017 9:57 PM

In its shareholder letter, Tesla also outlined how much cash it intends to burn for the rest of 2017.

Tesla's factory in Shanghai will focus on Model 3 production at first.

Tesla reported second-quarter earnings on Wednesday, beating analysts' expectations by posting a narrower loss, $1.33 per share, and the $1.88 anticipated.

In its shareholder letter, Tesla also outlined how much cash it intends to burn for the rest of 2017, as it ramps up production of the new Model 3 sedan.

"Capital expenditures should be about $2 billion during the second half of 2017, as we make milestone-based payments for Model 3 equipment, continue with Gigafactory 1 construction, and expand our Supercharger, store, delivery hub, and service networks," the company wrote.

With roughly $3 billion in cash currently on the balance sheet, Tesla should spend itself down to $1 billion by the end of 2017. This is the position that the company has historically said it likes to be in.

However, unless that position improves in 2018, Tesla will be running low on cash by its own standards. Capitalizing on Model 3 pre-orders will be critical; there are currently around 500,000, and Tesla has never built more than 100,000 vehicles in a year.

This sets the stage for an expected capital raise at some point in either 2017 or 2018. Tesla will hold an earnings call with analysts on Wednesday and CEO Elon Musk will likely be asked whether the carmaker would consider issuing new stock sooner rather than later.

pulse