On the conference call that followed Tesla’s third quarter 2020 results, Tesla chief financial officer Zachary Kirkhorn warned that the company was increasing its planned capital spending.
Now Tesla has released its 10Q SEC filing for the quarter and has clarified its investment plan:
Due to and subject to the foregoing as well as the pipeline of announced projects under development and any other continued infrastructure growth, we currently expect our capital spending to be at the high end of our range of 2, $ 5 billion to $ 3.5 billion in 2020 and will increase from $ 4.5 billion to $ 6 billion for each of the next two fiscal years.
That’s up to $ 12 billion over a two-year period (2021 and 2022).
Tesla explains that the money will go to deploy new production capacity at several factories under construction and in development:
We are simultaneously developing new products in the Model Y and solar roof, building manufacturing facilities on three continents, and driving the development and manufacture of new battery cell technologies, and the pace of our capital expenditure may vary depending on from the overall priority of projects, the pace at which we meet milestones, production adjustments on and among our various products, increasing capital efficiency and adding new projects.
Although the company plans to spend a lot more money, it still plans to remain marginally profitable.
Capital-intensive projects underway or planned notwithstanding, our business now consistently generates operating cash flow above our level of capital expenditure, and in the third quarter of 2020 we also reduced the use of our credit facilities for working capital. . We expect our ability to be self-financing to continue as long as macroeconomic factors support current sales trends. Combined with better working capital management resulting in shorter open sales days than open payables, our sales growth also facilitates positive cash flow generation. We also opportunistically bolstered our liquidity with a market offering of common shares in September 2020, with net proceeds to us of approximately $ 4.97 billion.
The automaker has listed all of the manufacturing capabilities it is currently working on:
This is what I love to hear. Up to $ 12 billion in just two years is a lot of money, and it will go a long way in accelerating the transition to electric vehicles.
Once all the money is spent, Tesla should have the capacity to produce more than 2 million electric vehicles per year.
I know the traditional automakers have announced big investments as well, but they’re usually on a long five-year and sometimes 10-year timeframe.
Tesla plans to spend the money quickly in order to quickly increase its production capacity.
Hopefully this will inspire others to speed up their EV investment timelines as well.
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