Tesla won’t raise capital, will focus on battery cost

Tesla shares extended their rally on Wednesday, rising more than 11% after market hours following better-than-expected results for the last quarter of 2019.

On an earnings call to discuss the Q4 report, retail and institutional investors asked CEO Elon Musk if it may not be a perfect time to raise more capital. They suggested Tesla could raise easily at favorable rates now, either to pay down its debts, or to accelerate the company’s progress on new products and factories.

Musk, whose sentiments were echoed by CFO Zachary Kirkhorn and Tesla’s Automotive President Jerome Guillen on the call, said Tesla has no intention to raise more capital at this time, or possibly ever again.

The Tesla CEO said, “We’re spending money as quickly as we can spend it sensibly.”

He emphasized, “We are not artificially limiting our progress. Despite all that we are still generating positive cash. In light of that, it doesn’t make sense to raise money because we expect to generate cash despite this growth level.”

Musk has a lot of big expenses ahead. Tesla has promised to build and start vehicle production at a factory near Berlin by the end of 2021. It is still building out its factory in Shanghai, and supply chains in China. And it has promised customers and investors “feature-complete” self-driving technology and a new Plaid powertrain this year, while mproved battery tech, an all-electric Semi truck, a next-generation Roadster and Cybertruck are also on the horizon.

Loup Ventures’ Gene Munster, who is bullish Tesla, asked Musk to speak to how much it may cost Tesla to produce Cybertrucks, and how many the CEO thinks his company could make.

Musk responded, “We don’t comment on those detailed numbers. The demand is far more than we can reasonably make in the span of 3-4 years.” Instead, he said, Tesla will be focusing on increasing battery production capacity and lowering the cost of battery production.

Musk said, “If you don’t improve that, you end up shifting unit volume from one part to another and you haven’t actually produced more electric vehicles. That’s one reason we have not accelerated production of the Tesla Semi. Because it does use a lot of cells. Unless we have got those cells available, then accelerating production of the Semi would mean making fewer Model 3 or other cars.”

Tesla plans to hold a Battery Day presentation for investors, most likely in April, Musk said.

Musk also declined to give details about planned capital expenditures for 2020, and how pricing on Tesla vehicles may change as the company begins producing and selling more of them outside of the U.S.

He said, “We’re trying to make the cars as affordable as possible, as fast as possible, while still being a little bit profitable and growing the company like crazy and having good free cash flow and accumulating a cash balance.”

While Tesla reported two consecutive quarters of profit in 2019, it has yet to sustain profitability for a full year. The company lost $862 million in 2019 (on a GAAP basis), an improvement from its loss of $976 million in 2018.