Tesla Model X Is $3000 Cheaper Today Due to Improved Margins

08 August, 2017, 00:46 | Author: Devin Moran
  • Tesla Model S Ferrari 458

The Model 3 base unit costs $35,000, which is about half the price of Tesla's next-cheapest auto, the Model S. While Tesla believes the lower price point would enable it to become more mainstream, analysts worry about the impact on margins, which already are under pressure. Tesla says the proceeds will be used to strengthen the balance sheet as it ramps Model 3 production.

Ten days ago, when the first 30 Tesla Model 3 electric cars were delivered to their owners at a much-publicized Handover Party, we didn't get full information on the latest Tesla model. Last year the company produced 84,000 vehicles, which was a gain of 64% from the prior year. Essentially, Tesla is borrowing money from investors and agreeing to pay them the money back plus interest.

"It's not like we're getting 10 percent to fund a negative-cash-flow company", he told Bloomberg. With a starting price roughly half the cost of the base Model S, the smaller sedan has racked up nearly half a million net reservations since the company began taking refundable deposits a year ago. The company expects to be manufacturing 5,000 cars per week by the end of the year, ramping it up to double that rate in 2018.

"You won't really need to look at an instrument panel all that often", Musk said during the Model 3 handover event, adding that people will eventually be able to "watch a movie, talk to friends, go to sleep" in Tesla's cars.


In March, the company raised about $1.4 billion through a stock and debt offering. For this year's second quarter, which ended in June, Tesla had reported 22,046 Model S and X deliveries. Piper Jaffray Companies set a $386.00 price objective on Tesla and gave the stock a buy rating in a research note on Thursday.

Investor enthusiasm has catapulted Tesla's market value past General Motors Co. and Ford Motor Co., but bringing out the Model 3 has been costly.

Tesla had a cash position of $3 billion at the end of last quarter and Musk said that he would like to keep it over $1 billion. Over the last quarter, insiders sold 115,980 shares of company stock valued at $36,010,269.

Tesla's bond will price later this week after several days of meetings with credit investors, who will weigh factors including the absence of a borrowing history, its lack of profit and its high cash-burn rate against its growth potential and its attractiveness as an environmentally-friendly "green" issuer.

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