Tesla will need to raise some money before it can build the Model 3.
Tesla could require a significant cash infusion from investors ahead of the company's planned July production start of the Model 3 sedan.
Tesla expects to spend between $2 billion and $2.5 billion in the run up to Model 3 production, which would put the company "very close to the edge," according to CEO Elon Musk. Tesla had $3.4 billion cash on hand at the end of the fourth quarter.
"It's certainly clear that some kind of capital raise is coming," David Whiston, an auto analyst at Morningstar Inc., told Automotive News. "They might want to do it soon."
Analysts believe Tesla will have to generate at least $1.5 billion through a new stock offering, but some expect that figure to balloon as high as $3 billion.
Despite that less-than-ideal financial outlook, Tesla is confident the Model 3 will put the company on the path to profitability. Not only is the Model 3 expected to sell in far greater numbers than the Model S and Model X, but it was designed from the onset to be easier and cheaper to build.
"The Model 3 is designed for manufacturing," Musk said. "It's a very compelling car, and we understand manufacturing a lot better than we did in the past."
The Model 3, which will list from about $35,000, is expected to enter production in July. Volume production of the electric sedan should be ramped up by September.