TSLA Tesla Inc

By John D. Stoll 

Tesla Inc. said it is on track to launch a more affordable car this year, but it needs to raise $1 billion to make sure it happens.

The Silicon Valley electric-vehicle maker said Wednesday it is offering $250 million in common stock and $750 in convertible notes to strengthen a fragile balance sheet amid a risky ramp-up of Model 3 production. Billed as a cheaper offering by a company known for pricey super cars, the Model 3 is intended to sell in much higher volumes than the current models and compete with more mainstream brands.

Tesla shares gained 2.3% to $261.50 in after-hours trading. Analysts had expected Tesla to seek as much as $2.5 billion in the near-term, citing its inflated market value (which is near Ford Motor Co.'s market capitalization).

Tesla is a perennial money loser, however, notching two profitable quarters since going public early in the decade. Deeply indebted and planning to increase production capacity, the company needs a cushion to move ahead in the capital-intensive auto industry.

Tesla has more than $2 billion due in 2018 -- a year during which Tesla aims to sell significantly more vehicles than last year. It also plans to continue investing heavily in overhead and product creation in coming years.

The company plans to make 500,000 cars a year by the end of 2018 and 1 million vehicles in 2020. It is a long way off from that mark. Last year, Tesla produced nearly 84,000 vehicles.

Chief Executive Officer Elon Musk signaled the need for more financing last month, a move his company has made several times in recent years even as it has consistently notched year-over-year quarterly revenue increases. Already Tesla's largest shareholder, Mr. Musk intends to buy about 10% of the common stock Tesla will issue in the public offering.

Mr. Musk has laid out plans for more electric models, including heavier-use products, such as a bus-like vehicle, and a pickup truck. With last year's acquisition of SolarCity Corp., he is laying the groundwork to turn Tesla into a sustainable energy company offering solar power, batteries and electric vehicles.

The Model 3 project has been in the works for several years. The car is expected to debut with a price tag under $40,000 and achieve far more than 200 miles on a charge, and will compete most directly with General Motors Co.'s Chevrolet Bolt.

Tesla's current products -- the Model X and Model S -- challenge Porsche AG, BMW AG and other premium nameplates.

Write to John D. Stoll at john.stoll@wsj.com

(END) Dow Jones Newswires

March 15, 2017 18:31 ET (22:31 GMT)

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