Tesla Announces $6-Billion Investment Plan For Next Two Years
Car manufacturer Tesla wasted no time in announcing an increase in the production and development of new vehicles. Moreover, the company said that it will also invest an additional $6 billion on machinery and factories for the next two years. All these announcements were made in a regulatory filing on Friday.
In the statement, Tesla made some impressive promises for the years to come. The company will focus on ramping up production of Model 3 even further in their Fremont factory, to about 10,000 vehicles a week, without incurring more costs. It said the factory currently makes approximately 7,000 units per week.
Additionally, it aims to focus on being efficient with their capital, although it still has plans to allot a notably and relatively fair budget on future investments. The company is planning to shell out $2.5 to $3 billion per annum in investments for 2019 and 2020.
Opening New Factory In China
Apart from revealing its investment plans, Tesla also said that it is intending to put up another factory in China, called the Gigafactory 3. The other two U.S.-based factories, where batteries and Model 3 drive train parts are manufactured, are located in Clark, Nevada, and Buffalo, New York.
What Tesla believes is that the money generated from its operations will suffice for the long list of things to be done in the next years. As for the Gigafactory 3, most of the funds for the project is expected to come from Chinese financial institutions which have agreed to give loans to the company.
In July this year, Tesla announced that the Chinese government has already green-lit the factory. Elon Musk, the automaker’s chief executive, estimated that Gigafactory 3 could cost $2 billion, most of which will come through loans from Chinese banks, as stated in recent news reports.
The announcement followed the electric car maker involvement in nasty controversies, including Musk’s high-profile feud with the SEC. Because of this, people thought that Tesla will slow down in its investments, but surprisingly, the company is doing the exact opposite.
The electric carmaker is estimating a production rate of 3,000 Model 3 units per week for the initial phase in the brand new Gigafactory 3. But this number is subject to change, Tesla disclosed. The time frame for its completion will depend on various factors, including regulatory approvals and construction pace, among many others.
This is the first factory that Tesla is building outside the United States, in a bid to circumvent the massive effect of import tariffs. Current auto exports to China are tagged with stiff tariffs, due to the ongoing trade dispute between the United States and China.
SEC and DOJ Investigation
Meanwhile, Tesla is facing quite a rocky end to the year after the Securities and Exchange Commission (SEC) and the Justice Department said they would investigate the company’s production forecast, as reported by The Wall Street Journal in late October.
Musk had denied the report and even described the article as “absurd.” However, this was finally confirmed through the filing by the company itself. Especially by the Justice Department’s arm, Federal Bureau of Investigation, which is determining whether Tesla had misled its investors by promising more numbers of the Model 3 units than it can produce in 2019.
Tesla admitted that it had received a request for information from the Justice Department and a subpoena from the SEC. Previously, Musk made statements that may have over-estimated numbers, however, this strategy isn’t new to most companies.
SEC is merely investigating to find out whether it was a deliberate attempt to mislead investors or simply an innocent mistake. In summer 2017, Musk promised that Tesla will make 20,000 cars per month by the end of the year. However, it turned out that the company only produced a meek 2,425 units in Q4.
The inquiry was also related to Musk’s statement in August this year. In a series of tweets, the CEO disclosed his intentions to take the company at $420 per share. This wasn’t the first time he talked about privatization plans. He also talked about it in November last year during an interview with the Rolling Stone, but according to Tesla’s recent filing, there was no development regarding this matter.
Following this admission, Tesla said that it will fully cooperate with the authorities throughout the course of the investigation.
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