Tesla Inc.'s Elon Musk is turning to a tried-and-true source of financing for his money-losing car company -- paying customers willing to wait years for him to deliver shiny new wheels to their driveways.
The Tesla CEO's unveiling of a massive Semi truck and souped-up Roadster sports car on Thursday raised questions among Tesla doubters who dismissed the products as distractions from the pivotal Model 3 sedan that's fallen behind schedule.
Valid as that argument may be, Musk is deploying a clever financing trick, taking in hefty deposits to help fund Tesla's way through its immense production challenges.
Tesla immediately began taking reservations of as much as $250,000 for the Roadster coming in 2020, and companies including Wal-Mart have already began pre-ordering Semi trucks going into production in 2019.
That's crucial cash coming in at a time when the company is burning through more than $1 billion a quarter, thanks to massive investment toward Model 3 manufacturing capacity that's looking less likely to generate a return anytime soon.
"Elon Musk just figured out a way to avoid banker fees for a several hundred million dollar capital raise," Brad Erickson, a KeyBanc Capital Markets analyst, wrote in a report to clients Friday. The Roadster "looked incredible and should be a meaningful force to raise some incremental capital for the company," offsetting about a month's worth of cash burn, he said.
We've seen this movie before.
Tesla was struggling with manufacturing problems plaguing the Model X crossover in early 2016 when Musk revealed the Model 3 at a splashy event also held at the company's design studio near Los Angeles.
Within a week, the carmaker received more than 325,000 reservations from consumers willing to put down $1,000 deposits, raising more than the $226 million generated from Tesla's June 2010 initial public offering.
Reservations for the Founders Series Roadster cost $5,000, plus a $245,000 wire transfer payment within 10 days, according to Tesla's website.
The company is charging a total of $50,000 to reserve the base model and the final price of the car will be $200,000. Closely held retailer Meijer Inc. is among the companies lining up to take deliver of the Semi, putting down deposits of $5,000 apiece.
"Here's another event to wow the audience while he's struggling to build the Model 3," said David Kudla, the CEO of Mainstay Capital Management. "The Roadster is beautiful and the technology is extremely impressive. But we have to look at the business overall. When will he make money?"
Tesla is limiting availability of Founders Series Roadsters to 1,000 reservations, which alone would bring in as much as $250 million in deposits. That's sorely needed: The company made only 260 Model 3 sedans in the third quarter, far fewer than planned.
Musk pushed back a goal to make 5,000 Model 3s a week by about three months and has demurred on when the company will produce 10,000 units per week, a rate he had projected earlier could be reached at some point next year.
Fixing the bottlenecks holding back Model 3 output remains essential because bringing the Semi and Roadster to market will bring about more costs.
"All last night's event did was add to Elon Musk's shopping list of things he needs to spend money on at a time when the company is having difficulty making its base vehicle (Model 3) and its equity and debt has traded off," Jeffrey Osborne, an analyst at Cowen & Co., wrote in a report Friday.