Tesla says Model 3 on track for volume production by September

By Alexandria Sage

SAN FRANCISCO (Reuters) - Tesla Inc (TSLA.O) said on Wednesday its mass-market Model 3 sedan was on track for volume production by September, relieving investors who see the electric vehicle as the avenue to profitability for the young company.

But the carmaker's operations continued to burn through money, and it plans an additional $2 billion to $2.5 billion in capital expenses before the Model 3 launch, a pace that analysts said could drive Chief Executive Elon Musk back to Wall Street soon for a fresh infusion of cash.

Tesla, whose shares rose 2.9 percent to $281.64 after the bell, beat analysts' expectations for revenue, while its adjusted loss missed the consensus target. Up to Wednesday's close, Tesla's stock had risen 53.9 percent in the last 12 months.

Many investors and suppliers have predicted Model 3 volume production would be delayed until 2018, but Tesla said it would produce over 5,000 Model 3s per week "at some point in the fourth quarter", and 10,000 vehicles per week "at some point in 2018".

Ivan Feinseth, director of research at Tigress Financial Partners, said Tesla "delivered the results the market has been expecting" that drove the stock from a year low of $167.84 last February to a year high of $287.39 last week.

By late spring or early summer, Feinseth estimated, Tesla will likely raise more money, noting that today's highs could make it sooner rather than later.

"You have to feed the ducks while they're quacking. If they came to the market now they would be well received," he said.

Tesla did not give its usual full-year delivery estimate, but said it expected to deliver 47,000 to 50,000 Model S and Model X vehicles combined in the first half of 2017. It did not give a Model 3 target.

In May 2016, Musk told investors Tesla was aiming to produce "100,000 to 200,000 Model 3s in the second half of" 2017.

Capital expenditures doubled in the fourth quarter to $521.6 million, as Tesla invests in its Fremont, California factory and its Gigafactory battery plant in Nevada.

Cash rose by $309 million to $3.39 billion, but that number includes funds raised from a share sale last year.

The quarter included solar power systems provider SolarCity, which Tesla acquired last year. Uncertainty by analysts on how Tesla would model SolarCity into its results resulted in a wide range of estimates.

SolarCity installed more than 20 percent less solar in the quarter, as it focuses on profitability and cash over growth. Solar generation deployed fell to 201 MW in the fourth quarter from 253 MW a year earlier.

Tesla's net loss attributable to common shareholders narrowed to $121.3 million, or 78 cents per share, for the fourth quarter ended Dec. 31 from $320.4 million, or $2.44 per share, a year earlier.

The adjusted loss of 69 cents per share compared with the analyst consensus of a 43-cent loss, according to Thomson Reuters I/B/E/S.

Revenue rose 88 percent to $2.28 billion, topping Wall Street's target of $2.18 billion.

(Additional Reporting by Rishika Sadam in Bengaluru and Nichola Groom in Los Angeles; Editing by Peter Henderson, Anil D'Silva and Bernard Orr)