Tesla Model 3s Annually Just About Right, Says Musk


Earlier in the week, Elon Musk's luxury electric vehicle maker was expected to raise at least $1.5 billion to accelerate production of its new Model 3, but strong demand allowed the carmaker to raise more, albeit at a slightly higher yield than expected.

If you need proof that bond investors have lost their minds, take a look at the latest bond offering from Elon Musk and Tesla Inc (NASDAQ:TSLA). There are several reasons why this is the vehicle the early adopter community (and first followers) is most in love with.

As a luxury vehicle, the Model S also has a few more perks than the Model 3. Tesla wants to make the Model Y a smaller SUV than the hideously ungainly Model X. It also wants to make it a more affordable SUV option, similar to the Model 3. Aside from massive battery production, it also builds Model 3 drive units at the desert facility, with plans to move more production for the company's other cars from its plant in Fremont, California, as the new factory expands. The company, despite receiving a "junk" rating from credit agencies, could wind up paying less than five percent on the issue. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day.

All in all, it is delays all around Tesla's camp.

CFRA equity analyst Efraim Levy said the bonds provide Tesla with funds "at least into mid-2018".

Bond investors might get a raw deal here.

The tactics worked, as noteholders are proving willing to overlook the company's negative cash flow and its repeated trips to capital markets to bolster its balance sheet. These mega-factories of batteries should help Tesla in its conquest of the title of world number one of the auto manufacturers. That is likely what Musk means by "production hell".

It's likewise fascinating to see how much less the Model 3 weighs compared to the Model S. Weighing in at 3,837 pounds, the Model 3 is nearly 1,000 pounds lighter compared to the 4,647-pound Model S. It's still no light-weight, however that's a considerable distinction.

Tesla had $3 billion in cash on hand at the end of the second quarter, but said it expects to spend $2 billion in the second half of this year.