Tesla has announced a surprise $1.6bn convertible notes offering, and plans to use the money to accelerate its Gigafactory project to mass-produce Li-Ion batteries at more affordable rates. The news - which will see Tesla offer $800 million aggregate principal amount of convertible senior notes due 2019 and $800 million aggregate principal amount of convertible senior notes due 2021 - will allow the company to move ahead on the Tesla Gigafactory project "faster than previously thought possible."
The facility will achieve far greater economies of scale, Tesla says, than existing battery production plants. In fact, it expects to have lowered the per-kWh cost of the battery pack used in the Model S - and, soon, other cars - by more than 30-percent by the end of the first year of volume production of the new mass-market vehicle Tesla has planned.
Other benefits of the collaborative project will include a reduction of logistics waste, the optimization of co-located processes, and reduced overhead, Tesla says.
As well as funding the Gigafactory project, Tesla's new influx of investment will be used to "accelerate the growth of its business" both in the US market and internationally, where Model S cars have begun rolling out to buyers over the past year. It will also be spent on production of the "Gen III" mass-market vehicle, Tesla says, along with other "general corporate purposes".
In addition, Tesla intends to grant the underwriters a 30-day option to purchase up to an additional $120 million in aggregate principal amount of convertible senior notes due 2019 and an additional $120 million in aggregate principal amount of convertible senior notes due 2021, for a total potential offering size of up to $1.84 billion.
The Tesla Model S was named the best car on the market by Consumer Reports recently, and the company saw record sales in its most recent financial results, despite some headline-grabbing fires in 2013. One possible short-term upgrade is a bigger battery option Tesla founder Elon Musk has teased, though the Model X SUV launch has been pushed back.