One Wall Street analyst is skeptical that Tesla will be able to avoid raising additional capital before the second quarter of next year, saying it would prudent for the firm to take action sooner.
One day after CEO Elon Musk said the electric car maker would not need to raise more capital this year — or in early 2017 — Oppenheimer analyst Colin Rusch told CNBC that the company would need to bring in more cash in the second quarter "at the very furthest out."
Otherwise, it could fall behind schedule on its plans for the Model 3, which is expected to go into production in summer 2017, Rusch said. Musk said on a quarterly earnings call in May that he expects to produce between 100,000 and 200,000 Model 3 units by the end of 2017. The company has a larger goal of producing 500,000 cars, including all three of its models, by the end of 2018.
"I think they would be prudent to raise capital sooner," Rusch said.
Prior to his Tweet, Musk had said repeatedly that the company would raise additional funds by the end of 2016 to fund its future plans. The firm reiterated its plan to raise additional funds by the end of the year in a filing with the Securities and Exchange Commission on Friday.
Yet on Sunday, Musk took to Twitter to say he would like to "correct expectations that Tesla/SolarCity will need to raise equity or corp debt in Q4. Won't be necessary for either." He followed that message by saying the companies "probably" would not need to do so in the first quarter of 2017, either.
"For a ramp like this that is so aggressive, and the ambitions of this organization, having an extra cash cushion makes an awful lot of sense to us," Rusch said.
In the meantime, there are other ways the company could boost its finances, Rusch said.
"We have seen them do some asset-backed financing at SolarCity, as well as with Tesla's inventories, and so we think they are going to continue to do that, along with expanding the lease program with the Model S and Model X," he said. "And so as we go forward that is going to ease their cash needs, but they will need to raise capital."
Rusch also said Musk's earlier tweet teasing "unexpected product announcements" in October will likely be an "incremental refinement of some existing product" rather than a big announcement, such as a new model.
"Typically with a bigger product, they would do a big media prep," he said, "and plenty of lead time to make sure there was enough attention focused on a major announcement."