Computer-generated image of proposed Tesla Motors Gigafactory
Carmaking is very, very, very expensive.
A conventional vehicle platform or architecture generally costs about $1 billion to design, engineer, test, certify, and put into production.
And the various models derived from that architecture usually last about seven years.
2014 Tesla Model S
Multiply that by multiple platforms, each of which can spawn up to a dozen vehicles, plus many dozens of different versions for different (and often conflicting) regulatory regimes and tastes in different countries around the world, and it all adds up fast.
Which is why, according to legendary investment house Goldman Sachs, even Tesla Motors is going to need more cash to fund its expansion plans.
Specifically, as reported by Bloomberg, Tesla will need about $6 billion dollars over the next decade--above and beyond the revenue it receives from ongoing operations.
Goldman analyst Patrick Archambault, a regular presence on Tesla's quarterly earnings calls with the finance industry, says the cash will be needed if Tesla's future products become "breakout" products that sell at hugely high volumes--like the first Apple iPhone or, closer to the auto industry, the Ford Model T.
Tesla Model X prototype in Culver City, California [photo by Instagram user jmtibs]
The bulk of the capital, Archambault wrote, would be needed in 2017 and afterward, indicating that Tesla can fund its near-term plans to boost production of its current Model S and planned Model X electric cars to a rate of 100,000 a year by the end of 2015.
The company expects to introduce its third-generation car, the Model 3, in late 2017, and is targeting volumes of up to half a million cars a year once various Model 3 derivatives have been launched.
The batteries that power the Model 3, however, will have to come from Tesla's so-called "gigafactory," the gigantic lithium-ion cell and battery-pack production facility it plans to build outside Reno, Nevada.
That facility alone is estimated to cost $5 billion, of which some will be funded by Tesla, some by its cell-production partner Panasonic, and some by the state of Nevada--which has committed to a total of $1.3 billion in various incentives over the life of the plant.
Slide showing Tesla Motors gigafactory statistics, from Feb 2014 presentation
This all depends, of course, on Tesla's expansion continuing on track.
The next milestone will be the unveiling of the considerably delayed Model X electric crossover utility vehicle, which is supposed to go into volume production in the second quarter of 2015.
Tesla CEO Elon Musk has said the company thinks it may sell as many Model X SUVs as it does Model S sedans. Tesla claims roughly 20,000 pre-orders for the Model X.