Tesla struggles with production as it plans to sell its shares
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Tesla Motor Inc., Model S

Tesla Motor Inc., Model S

Tesla Motors Inc., the electric car maker, faces a revenue drop as it struggles with supplier problems and delays in ramping up production of its Model S.  According to the company statement, Tesla Motors Inc.’s sales will be around $45 million, which is far below estimates of $80 millions. Tesla Motors Inc. decided to sell about 4.3 million shares of its stock to raise money after getting a waiver on existing terms of $465 million U.S. Energy Department loan.

Troubles in Production Have Impact on Tesla’s Results

Tesla Motors Inc. has admitted that it has problems producing the number of cars of Model S it anticipated since it launched the production of it in June.

According to Tesla Motors Inc.’s statement, the company expects to generate between $44 million to $46 million in third-quarter sales, compared with the approximately $83 million experts had estimated  based on the company’s production goal.  Tesla Motors Inc.’s forecast regarding its full-year revenue was cut to $400 million - $440 million, which is down from estimated average of $560 million to $600 million. Consequently, Tesla Motor Inc.’s shares dropped 9.8 percent, or $3.00, which is the biggest daily fall since the 13th of January.

Troubles with production regard the production of Tesla Motors Inc.’s main model of sedan called the Model S. The car is a high-performance vehicle which goes from zero to 60 miles per hour in only 4.4 seconds. Tesla Motors Inc. has already started producing the Model S, however the company is almost four to five weeks behind terms of delivering the car to first customers. And the production, even though it has not given any profits yet, is at the same time eating a lot of cash at a rapid rate. In addition, it is the production, or to be more clear troubles in the production, that caused cuts in Tesla Motors Inc.’s forecast.

The Loan from the U.S. Government

The U.S. loan program, which was largely promoted by Barack Obama’s administration, initially intended to encourage companies to design and build more environmentally friendly cars. The money was given to, inter alia, Ford Motor Co., Nissan Motor Co., Fisker Automotive Inc. and Vehicle Production Group LLC.  However the program faced a strong criticism from Republicans, including vice president candidate Paul Ryan and Iowa Republican Senator Charles Grassley. The critique focused mainly on the Fisker loan and Solyndra’s case. Solyndra, a solar-maker company, collapsed just one year ago owing taxpayers roughly $535 million. Charles Grassley commented the U.S. loan program in general by saying: “Ensuring that the taxpayer is repaid in full should be standard operating procedure.”

Tesla Motors Inc.’s troubles and problems probably will also draw a criticism of the U.S. government’s energy loan program. Recently Tesla Motors Inc. received additional time to make a future payment. But under the new terms of the loan, the company will have to pass a test which compares short term assets with short-term liabilities.

Officials of Tesla Motors Inc. informed that the company will start repaying loan principal in December, as it is required under the lending agreement. According to the last filling, the company’s repayment schedule for interest on the loan began few months ago, in February. Tesla Motors Inc., which went public only one month after it had received the loan for the government, informed that it would be seeking for additional capital. As it has been stated by the company, it is going to sell approximately 4.3 million Tesla Motors Inc.’s shares and it estimates the net proceeds of $128.3 million or $147.6 million.

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