Tesla Inc. and the Shanghai government have left out a crucial detail in announcing a groundbreaking deal for the biggest name in electric cars to build its vehicles in China: how much it’s all going to cost.
Chief Executive Officer Elon Musk sealed a crucial agreement Tuesday to start building its second car assembly plant in the world. Construction will begin soon after approvals and permits are secured, and the first vehicles will roll off the line within roughly two years, a Tesla spokesman said in an email. It’ll take another two to three years for the factory to reach its capacity to build about 500,000 vehicles annually.
The preliminary agreement is a major development in Tesla’s more than yearlong effort to open China’s first production facility that will be wholly owned by a foreign carmaker. But the absence of detail about the size of the investment is turning heads because the Musk-led company had just $2.7 billion in cash at the end of the first quarter. Tesla has been burning through billions of dollars as it’s struggled to ramp up manufacturing of the Model 3 sedan.
“The biggest question right now for investors — bulls and bears alike — is how are they going to pay for it,” Ben Kallo, a Robert W. Baird & Co. analyst with the equivalent of a buy rating on Tesla shares, said in a Bloomberg Television interview. “They will have to get capital.”
