Eyeing the big leagues: Tesla racing toward annual volume of 500,000 cars

Tesla Model 3
The race is on, and Tesla is in it to win it. After being stunned by the strong demand for its recently unveiled Model 3, Elon Musk’s car company is flooring it, promising to build a grand total of 500,000 all-electric vehicles in 2018. This would put Tesla two years ahead of its long-term growth plan, and will cost a lot of money.

This massive production schedule has been necessitated by the staggering popularity of its latest sedan, which generated some 400,000 orders in April. The car will go into production late next year, and the company says that its capital spending will increase around 50 percent beyond what it previously planned, hitting approximately the $2.25 billion mark. “Increasing production five-fold over the next two years will be challenging and will likely require some additional capital, but this is our goal,” the company said in a statement.

Musk’s company reported its first quarter results on Monday, and while it logged a net loss for the beginning of 2016, experts say that such growing pains are to be expected, and that Tesla’s cars are “close to perfect.” The manufacturer plans on delivering 80,000 to 90,000 electric vehicles by year’s end.

“It’s going to be challenging, making cars is hard, and there are all sorts of moving parts, and competition will come from known and unknown places,” said Tigress Financial Partners analyst Ivan Feinseth. “I will suggest it’s going to take a lot of capital. But car manufacturing is a capital intensive business. (Musk) has had no problem raising money in the past.”

In an investor’s call last week, Musk expressed optimism regarding Tesla’s production schedule, saying, “If you go five years in the past for Tesla, we were producing 600 cars per year — now we can produce 600 cars in three days. So I think going from here to 500,000 cars a year is a much smaller leap.”

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