Tesla Motors has taken investors on a thrill ride since the Silicon Valley automaker went public five years ago. This week, Chief Executive Elon Musk said he is considering plans to raise more capital with the news that Tesla loses over $4,000 on every Model S electric sedan it sells.
On Wednesday, the automaker cut production targets for 2015 and 2016 while saying it burned through $359 million in cash last quarter.
Most of Tesla’s cars are built to order. The automaker delivered 11,532 cars in the second period with an operating loss of $47 million, which comes out to an operating loss of nearly $4,000 per car.
Musk has given himself a deadline by promising that by the first quarter of next year, Tesla will be making enough cash to fund a jump from producing a single expensive and low-volume vehicle to mass-producing several models and expanding its venture to make electric power storage systems, Business Insider reported.
Shares of Tesla declined nearly 9% on Thursday and another 2% on Friday as investors considered Musk’s very ambitious plans. On June 30, Tesla had only $1.15 billion cash on hand, less than half that of last year.
Automakers need a large cash supply to cover the assembly-line equipment as well as tests for emissions and safety standards. In general, it costs at least $1 billion to engineer and bring to market a new automobile.
Established manufacturers like General Motors have larger cash supplies as they’ve recovered from the government-backed bankruptcy from six years ago. General Motors had over $20 billion in cash reserves on June 30. GM sells over 9 million vehicles each year, while Tesla has plans to make about 50,000 in 2016.
Meanwhile, Musk said that demand for the company’s revolutionary Powerwall battery “has been crazy.” Musk revealed that there have been over 100,000 reservations (worth about $1 billion) for the rechargeable lithium-ion batteries, which are sold out through 2016.
The Powerwall allows small businesses and homes to use and store energy generated from solar panels or when utility rates are low, storing excess energy on-site. Forbes quoted Musk as saying the concept of the Powerwall can “shut down half of the world’s power plants.”
You can basically, in principle, shut down half of the world’s power plants if you had stationary storage.
Also this week, Tesla unveiled its new snake-like charger that will automatically connect to the Model S sedan. Musk hinted via Twitter last year that Tesla was planning on a robotic charger.