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Tesla facing production delays, will sell more stock to raise cash

The electric car maker says it has had trouble producing as many of its Model S sporty hatchbacks as it had anticipated.

September 26, 2012|By Jerry Hirsch, Los Angeles Times
  • Elon Musk, co-founder and chief executive of electric car maker Tesla Motors Inc., is interviewed on Bloomberg Television in New York.
Elon Musk, co-founder and chief executive of electric car maker Tesla Motors… (Ramin Talaie, Bloomberg )

Electric car maker Tesla Motors Inc. cut its revenue projections as supplier problems and production delays hurt sales of its Model S sporty hatchback.

In a Securities and Exchange Commission filing Tuesday, the Palo Alto automaker said it has had trouble producing the number of vehicles it anticipated since launching production of the car in June.

Tesla said it will generate $44 million to $46 million in third-quarter sales, compared with the roughly $80 million analysts had projected based on the company's production goals. Tesla shares fell $3, or 9.8%, to $27.66.

"The Model S is an all new vehicle which we are producing with new employees using new equipment. As our main focus is on quality, we have methodically increased our Model S production at a rate slower than we had earlier anticipated," Tesla said in the filing.

"Our suppliers also must produce new products in sufficient quantities and quality levels to meet our increasing demand. Certain suppliers have experienced delays in meeting our demand and we continue to focus on supplier capabilities and constraints," the automaker said.

Tesla's announcement "does elevate questions on its ability to ramp manufacturing," but is not "wholly unexpected" given the start-up nature of its operations, said Amir Rozwadowski, an analyst with Barclays Capital.

The Model S is a luxury hatchback that offers seating for five adults and sells for about $50,000 to more than $100,000 depending on trim level and options. It is fast, boasting a zero-to-60 miles per hour acceleration of less than six seconds. The car has received rave reviews from the automotive press.

Tesla builds the Model S at a factory in Fremont, Calif., where it plans to also make the Model X, an electric SUV built on the same platform and sharing much of the technology, starting late next year.

As of this week, Tesla has built 255 Model S cars, and has reached a weekly production rate of 77 vehicles. The company wants to produce cars at a rate of 400 a week. Tesla anticipates building 20,000 cars in 2013.

Tesla also cut its annual revenue projection because of the delays. It said it will bring in $400 million to $440 million this year, down from previous estimates of $560 million to $600 million.

The automaker also announced plans to raise more money via a stock offering of 4.3 million shares and has granted the underwriter, Goldman, Sachs & Co., a 30-day option to buy almost 700,000 additional shares. At the current stock price, that would raise about $140 million.

"The size of the transaction seems to be the right size — not too large as to concern investors about Tesla's production abilities, but big enough to provide a sensible cushion for any issues that may emerge as it ramps production," Rozwadowski said.

Tesla has fully drawn down a $465-million Energy Department loan that is part of a program that makes funds available to makers of alternative-fuel vehicles. After the offering, the automaker will have about $228 million in cash.

Tesla also said it is about to open the first locations in its Tesla Supercharger network, which consists of company-operated solar-powered electric charging stations that will enable Tesla driver to charge their vehicles as they drive across California. The first six stations will be in Folsom, Gilroy, Coalinga, Lebec, Barstow and Hawthorne. It will take about 30 minutes to give the vehicles a charge that lasts about 150 miles.

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