Tesla is finally profitable and now CEO Elon Musk expects that the company will remain so going forward.
Some thought Tesla would have to slow its investments and its rapid growth in order to achieve that, but the company now guidelines massive multi-billion investments in its gigafactories over the next 2 years.
Today, Tesla released its 10Q filing for their third quarter and added some interesting comments.
The company said it will focus on greater “capital efficiency”:
“In 2019, we expect to continue to increase the Model 3 production rate in our Fremont factory while needing only limited additional capital expenditures. As we continue to expand our existing manufacturing capacity, introduce new products, expand our retail stores, service centers, mobile repair services and Supercharging network, we will continue to utilize our increasing experience and learnings from past and current product ramps to do so at a level of capital efficiency per dollar of spend that we expect to be significantly greater than historical levels.”
While the company plans to be more efficient with its capital, it still plans to invest some significant capital.
At the manufacturing level, Tesla shared some numbers.
They said that they plan to spend between $2.5 and 3 billion per year at Gigafactories 1, 2 and 3, and in “other infrastructure growth”:
“Considering the pipeline of new products planned at this point, and consistent with our current strategy of using a partner to manufacture cells, as well as considering all other infrastructure growth and expansion of Gigafactories 1, 2 and 3, we currently estimate that capital expenditures will be between $2.5 to $3.0 billion annually for the next two fiscal years. Moreover, we expect that the cash we generate from our core operations will generally be sufficient to cover our future capital expenditures and to pay down our near-term debt obligations, although we may choose to seek alternative financing sources. For example, we expect that much of our investment in Gigafactory 3 will be funded through indebtedness arranged through local financial institutions in China. As always, we continually evaluate our capital expenditure needs and may decide it is best to raise additional capital to fund the rapid growth of our business.”
When announcing its third quarter result, Tesla said that it will bring ‘some parts of Model 3 production’ to China as soon as next year.
With the 10Q filing, they added some more details about those accelerated plans to build Model 3 at Gigafactory 3 in China:
“We are seeking to alleviate the impact of such tariffs for Model 3 by developing plans to start producing approximately 3,000 Model 3 vehicles per week in Shanghai, China in the initial phase of our Gigafactory 3, which will have progressively increased levels of localization through local sourcing and manufacturing. However, the timeframe for that is subject to a number of uncertainties, including regulatory approval, supply chain constraints, and the pace of bringing the factory online. Ultimately, achieving increased Model 3 production cost-effectively will require that we timely address any additional bottlenecks that may arise as we continue to ramp, achieve reduced labor hours and increase supplier capacity.”
As for Model 3 production in Fremont, Tesla is still pushing for “approximately 10,000 units per week”.
The company is still being vague about the timing, saying that they are aiming for “the most optimal manner from both a timing and capital expenditures perspective.”
For now, the company claims to be able to get to 7,000 units per week “with only limited additional capital expenditures.”
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