Musk says Tesla won't be selling stock and plans to fund China factory with 'local debt'

Key Points
  • On Tesla's earnings call, CEO Elon Musk said the company doesn't need to raise cash through stock sales.
  • The company's new Gigafactory in China can be funded through a local bank loan, he said.
  • Tesla shares rose in extended trading.
Shanghai Mayor Ying Yong and Tesla Chairman and CEO Elon Musk pose in from of a plaque for the Tesla (Shanghai) Ltd. Electric Vehicle Development and Innovation Center.  
Source: Shanghai Municipal People's Government 

Tesla CEO Elon Musk sees no need for his electric car company to raise cash by selling stock and said that a new factory in China will likely be funded with a loan from a local bank.

"We will not be raising equity at any point," Musk said during Tesla's second quarter earnings call on Wednesday. "I have no expectation of doing so, do not plan to do so."

Investors have questioned how Tesla will continue to fund its operations given that the company is burning cash to ramp up development of its Model 3 sedan. Tesla said on Wednesday that its quarterly loss widened to $742.7 million from $401.4 million in the same period a year earlier.

The company said it's on its way to reaching profitability by improving margin and cutting costs. Musk said the company will be cash-flow positive in the third quarter. The stock rose 9 percent in extended trading after revenue topped analysts' estimates.

Tesla stock volatile after hours following earnings
Tesla stock volatile after hours following earnings

As for the upcoming factory in China, Musk said the plan is to fund it with "local debt."

During its annual shareholder's meeting on June 5, Musk and Robin Ren, head of Tesla's worldwide sales, said they planned to build a "Dreadnought" factory in China to produce batteries and assemble vehicles in the same place.

Last month, Tesla said it signed an agreement to build Gigafactory 3 in Shanghai. The company said that it would take two years to start producing cars and that eventually the factory would build 500,000 vehicles a year for Chinese customers. Tesla still needs to secure permits in Shanghai and reaching full capacity could take up to five years.

WATCH: Musk on Tesla's goal going forward

Goal to be profitable every quarter going forward: Musk
Goal to be profitable every quarter going forward: Musk

— CNBC's Lora Kolodny contributed to this report