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Tesla Expands Borrowing Capacity (Again)

Tesla Expands Borrowing Capacity (Again)

Tesla, Inc. has increased its borrowing capacity for a second time in the last six months, according to Automotive News. Striking a deal with creditors, the company has managed to increase its lines of credit by $800 million to $3.825 billion as the company ramps up spending to launch the new Model 3 sedan.

The company previously increased credit lines back in December and raised additional working capital through equity and debt offerings in March. Both capital events were intended to raise the funds needed to begin Model 3 production this summer.

The credit increase comes as little surprise. Tesla has burned cash over the last two quarters and previously signaled it has plans to increase capital expenditures in the coming months. The company’s cash position should be positively impacted once Model 3 deliveries begin to happen, bringing in additional needed cash.





 

About Nick Saporito

AutoVerdict Senior Editor Nick Saporito began writing about cars at age 13. Nick ran a couple of automotive enthusiast sites for several years, before taking some time off to focus on his career and education. By day he's a marketing executive in the telecom world and by night he hangs out here at AV. You'll find him focusing on tech, design and the industry's future.
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  1. Tone
    Andrew_L
    I get that but for how long will they let them keep losing money if the model 3 keeps the same path of losing money I just don't see how they will allow them to keep expanding their borrowing capacity.


    I think the Model3 is a huge test for them, but perhaps not on profitability. They absolutely need to demonstrate they can deliver a volume product that gets market traction. The car can't have a deal-breaking faults -- a lot of the tolerance for issues in the ModelX, for example, may not be there with the new customers Tesla is attracting, who will not have a garage full of other cars.

    The company Tesla reminds me most of is Amazon. Like Tesla, they've had many paths to growth and profitability. Amazon started selling books and now are a tech company that sells computing power to other companies (AWS). All while their original business (e-commerce) continues to grow. And, similarly, Amazon took hits for a long time for a lack of profitability, but of late (last 8-quarters) has been profitable.

    I think investors will be patient on Tesla profitability if they can continue to show improving execution and success -- and if the businesses that they are in continue to show a lot of potential for growth. We'll see.
    Andrew_L
    Tone
    Sure, but profitability isn't always the best measure of a high-growth company in an expanding sector. Investors are betting on future growth to provide potentially significant profitability. And, Tesla's diversified approach has to be attractive. A cursory look at their business shows a couple of different paths to sustained growth and profitability, including becoming a supplier to other automakers (batteries, battery management, etc); an energy company (Superchargers aren't going to be free forever) and/or a more traditional automaker. That gives them options to react as the market evolves to pick the best 'path'.


    I get that but for how long will they let them keep losing money if the model 3 keeps the same path of losing money I just don't see how they will allow them to keep expanding their borrowing capacity.
    Tone
    Andrew_L
    We shall see about that. Tesla has only had 2 profitable months since existing?


    Sure, but profitability isn't always the best measure of a high-growth company in an expanding sector. Investors are betting on future growth to provide potentially significant profitability. And, Tesla's diversified approach has to be attractive. A cursory look at their business shows a couple of different paths to sustained growth and profitability, including becoming a supplier to other automakers (batteries, battery management, etc); an energy company (Superchargers aren't going to be free forever) and/or a more traditional automaker. That gives them options to react as the market evolves to pick the best 'path'.
    Andrew_L
    The company's cash position should be positively impacted once Model 3 deliveries begin to happen, bringing in additional needed cash.


    We shall see about that. Tesla has only had 2 profitable months since existing?
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