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Tesla May Raise Gigacapital to Build Gigafactory

Maker unlikely to meet demand in China this year.

by on Feb.20, 2014

Tesla CEO Elon Musk said the company would likely need to raise capital if its proposed battery "gigafactory" was to be ready in the next three years.

Tesla Motor’s financial results showed the company’s progress, but the performance of the stock reflects its perceived potential. Now it appears the EV maker is going to leverage that to raise capital.

The company is preparing to announce its plans to develop a “gigafactory” that would produce batteries for its vehicles at a much higher volume and much lower cost, but in order to do it, it’s going to need some cash and now’s the time to get some with the stock price at an all time high.

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“I think that’s a good idea,” said said Elon Musk, Tesla’s founder and leader, during a conference call with analysts yesterday. He declined to comment specifically about the possibility, but allowed if the company were to build the gigafactory within the next three years, raising money to do so would be necessary. Since the announcement for the plan will be next week, it seems getting some more cash is on Tesla’s agenda.

The Tesla Model S is such a big hit in China, the maker is unlikely to be able to meet the demand for the vehicle this year.

Musk also noted on the call that the company is facing some product demand issues this year.

Last month, Tesla opened its first retail store in Beijing and it is now the maker’s busiest location in the world. While it’s always good that your product is in demand, the EV maker is facing a tough reality: it probably won’t be able to meet that demand.

“It seems unlikely we’ll be able to satisfy demand in China this year,” Musk said. He declined to predict how many vehicles the company would send to China, but seemed resigned to the fact that it wouldn’t be enough.

The company expects to deliver 35,000 vehicles in 2014 with Europe and Asia – primarily Germany and China – more than doubling the demand of North America in the fourth quarter of this year.

He also noted that the company wouldn’t need to partner with a local company for some time as the volumes in China don’t necessitate building a plant there.

(Tesla loses and earns money in Q4 and FY 2013. For more, Click Here.)

Tesla's Elon Musk told analysts he believes that Model X demand will be greater than that of the Model S.

“Sales and service is not a problem in China,” he noted. “It’s more local manufacturing. The expectation is that you partner with a local entity. We’re just at the early stages, the really early stages, of (planning to make) cars in China. For the short to medium term, there’s not a need for a local partner.”

(Click Here to get details on how Wanxiang captured remains of Fisker.)

The company is also charging ahead with the plans to begin producing the Model X in large numbers early next year. While Musk wouldn’t commit to any sales numbers, he seems to think the new vehicle will outsell the old one.

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“Model X is demand is very high,” he said. “Even though we’ve done zero marketing for Model X, it’s essentially…well…it’s like the fish are jumping in the boat. We are not trying to sell the Model X at all, but demand is so high.

“Where will demand settle for the X…at least as much as the S. I can only guess that the X demand will exceed the S demand. That’s my best guess.”

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