TSLA Tesla Inc

Tesla Motors Inc. posted its best sales quarter ever as the electric-vehicle maker prepares to raise the added cash it needs to begin production of its Model 3 sedan, which is aimed at the mass market.

Chief Executive Elon Musk wanted a strong third quarter to help build his fund-raising case for the Model 3's production line and for the company's Gigafactory, a massive battery-making facility in Nevada.

On Sunday, Tesla said third-quarter global deliveries of its vehicles more than doubled from a year earlier to 24,500. They included 15,800 Model S sedans and 8,700 Model X sport-utility vehicles. An additional 5,500 cars were in transit to customers and will be counted in fourth-quarter sales, said the company, which is based in Palo Alto, Calif.

The results suggest that Tesla's sales haven't been hurt by the June 30 disclosure of a fatal crash in Florida involving the driver of a Tesla Model S who was using the car's Autopilot feature.

Federal regulators are investigating the crash, which the company said was the first known fatality involving Autopilot, which can take control of a car in certain driving conditions. Tesla has since begun rolling out software updates to the feature, which is regarded as a major step toward a self-driving car. Mr. Musk says the updates to Autopilot would have prevented the crash.

The company said its third-quarter production rose 37% from the second quarter to 25,185 vehicles. It also reiterated its forecast that it would produce 50,000 vehicles in the second half of 2016, and said sales and production during the fourth quarter would be flat to slightly better than in the third quarter. Tesla delivered fewer than 30,000 vehicles during the first six months of the year.

Mr. Musk is under pressure as he handles the scrutiny of the fatal Tesla crash and tries to merge his company with SolarCity , where he is chairman. After the merger, Tesla said it planned to tap the debt market or issue shares before the end of the yearto raise money for the needs of the combined companies and for bringing out Tesla's new Model 3 car.

The $35,000 sedan, slated for next year, is Mr. Musk's bet that he can bring an electric vehicle to mass-market customers, riding the wave of excitement behind the pricier Model S since it went on sale in 2012.

After Tesla began taking reservations for the Model 3 this year, strong demand led it to say it would hit its sales target of 500,000 annually in 2018, two years earlier than expected.

Mr. Musk's success drumming up interest in electric vehicles has spurred traditional auto makers to push harder into that market. General Motors Co. plans to bring out a fully electric Chevrolet Bolt later this year.

Ahead of raising cash in the fourth quarter, Mr. Musk urged employees to limit spending and increase sales. "The third quarter will be our last chance to show investors that Tesla can be at least slightly positive cash flow and profitable before the Model 3 reaches full production," Mr. Musk wrote in a memo that Bloomberg News reported on last month.

The pressure to produce sales apparently got to some within the organization. Last week on the social news site Reddit, a customer detailed allegedly aggressive sales techniques by Tesla, including the mention of a discounted sales price, an apparent violation of company policy.

Mr. Musk investigated the matter and, in a memorandum posted on Twitter last Wednesday admonished his employees for offering discounts on "a small number of cases."

"It is absolutely vital that we adhere to the no-negotiation and no-discount policy that has been true since we first started taking orders 10 years ago," he wrote. "This is fundamental to our integrity and we maintained this policy even through the terrible depths of the great recession."

He said that it is fine to discount floor models or those damaged before delivery, but "never—and I mean never" a new car in pristine condition, he wrote. "This is why I always pay full price when I buy a car and the same applies to my family, friends and celebrities, no matter how famous or influential."

(END) Dow Jones Newswires

October 02, 2016 21:45 ET (01:45 GMT)

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