Tesla is now going all-in on the Model 3, as the company has continued to make moves related to the production and release of the mass-market electric vehicle.
Tesla is now seeking to raise about $1.5 billion to support the production of the Model 3 and has also slashed $3,000 off the price of the Model X electric SUV.
Tesla Seeks To Raise $1.5 Billion
Tesla is looking to raise $1.5 billion from the company's first-ever offering of junk bonds, which are lower-quality investments that promise higher yields, to raise fresh capital to ramp up Model 3 production.
The decision to go with junk bonds instead of issuing more Tesla stock presents a belief by CEO Elon Musk that bond investors will be just as optimistic as stock investors that the Model 3 will go on to become a massive success.
Tesla has so far raised money through equity offerings and convertible bonds, which are eventually converted into Tesla shares. In March, the company announced a plan for additional funding worth $1.15 billion through a combination of Tesla common stock and convertible senior notes.
The electric car company currently has over $3 billion in cash, but the need to raise additional funding is critical. Tesla is burning through about $1 billion per quarter, as it starts its ambitious plan of ramping up Model 3 production to over 400,000 units per year in only 18 months.
Fortunately, it appears that Tesla is in no shortage of backers. The company's stock price has increased by 67 percent this year, and it is widely expected that bond investors will show the electric car company the same amount of support.
Tesla Slashes $3,000 Off Model X Price
Tesla, meanwhile, has quietly slashed the Model X price by $3,000, reducing the base price of the electric SUV to $79,500.
The company has reportedly achieved certain production efficiencies with the Model X, allowing Tesla to pass on the savings to customers by reducing the price of the electric SUV.
In addition, other variants of the Model X and Model S are receiving more standard features. For example, the top-end versions of the two vehicles are receiving the Premium Upgrade Package, formerly a $5,000 option, as a standard feature.
The efficiencies achieved for the Model X and the reduction of configurations of the electric SUV and the Model S are all connected to the entrance of the Model 3. Tesla has applied its learnings from past scenarios into Model 3 production, and the lower number of configurations means that the company can focus more on the mass-market electric vehicle.
Here Comes The Tesla Model 3
The first Model 3 rolled off the production line in July, and the first 30 units of the mass-market electric vehicle were delivered to customers a few weeks after.
The Model 3 has already received over 500,000 reservations, as the $35,000 electric vehicle has drawn massive interest. It offers a range of 220 miles on a single charge for its base model, with a minimalist design for its interiors.