Tesla Motors (NASDAQ: TSLA) stock is advancing by 3.99% to $235.95 in afternoon trading on Thursday, as lines formed outside the company's showrooms ahead of the Model 3 reveal. Hundreds of customers waited for their nearest showrooms to open at 10 a.m. local time to place a $1,000 deposit for the Model 3 which is priced at $35,000, the company's economic electric vehicle. Also early U.S. buyers will be able to receive $7,500 in federal tax incentives. For the last year, Tesla’s annual losses tripled in 2015 to $900 million despite a 27% sales increase.
Mr. Musk’s ultimate goal is get the vehicle to a wider market, forecasting 500,000 total company sales annually by 2020. Much of that increase would come from a Model 3 that competes against mass-market cars from General Motors Co.’s Chevrolet and Nissan Motor Co.’s Leaf.
Barclays estimates the new vehicle will attract 95,000 reservations ahead of first deliveries, or more than three times as many amassed by the Model S when it went on sale four years ago. That product required a $5,000 deposit.
Other analysts say Mr. Musk has to improve his delivery performance. The Model X, a sport-utility vehicle that went on sale late last year, faced several delays and initial production has been hampered by problems with its seats and other manufacturing bugs.
As Tesla pursues mass-market acceptance by adding capacity at an assembly plant in California, adding administrative and engineering overhead, and building a battery “gigafactory” in Nevada, its red ink is mounting. Annual losses tripled in 2015 to $900 million despite a 27% sales increase.
On the opposite of all those positive signals, its utilization at the new battery plant near Reno, Nev. Slated to cost $5 billion and employ thousands of workers, Tesla will need to generate revenue from the Model 3 to start paying off the bet on the plant. Tesla is burning the money at a significant speed and the model 3 here almost determines whether the company would have enough money to supply its expansion and consolidate its market share in the electronic car market.
There also is potential for competitors such as Audi AG, which is ramping up electric-vehicle plans, and GM with its coming Chevrolet Bolt electric vehicle, scheduled for late 2016 with a $30,000 price tag and 200 miles in driving range, could provide immediate pressure.