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11/24/2024 12:16:19 am

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Model 3 Preorder Frenzy Could Spell Trouble for Tesla

Tesla Model 3 will contain less aluminum and more steel than its predecessors Model S and X.

(Photo : Reuters) Tesla Model 3 will contain less aluminum and more steel than its predecessors Model S and X.

Tesla's extensive marketing effort for the Tesla Model 3 electric car has exponentially paid off as the company reported more than 325,000 potential buyers already deposited $1,000 each for a car that they will not get for the next two years.

When Tesla started to allow pre-orders for the Model 3, crowds of interested buyers have lined up on several Tesla stores, a sight that instantly reminded analysts of the same queue whenever tech giant Apple releases a new iPhone.

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As the demand continues to rise, market analysts are wondering if Tesla can deliver the goods within the timeline it provided. Market experts claim that Tesla needs to raise at least $3 billion to expand its production capacity to handle the increasing demand.

However, Tesla is showing no signs that it needs more cash, but analysts agree that the car manufacturer could use the upsurge of demand as a leverage to raise additional capital.

The company had $2.64 billion long-term debt by the end of last year.

"We believe Tesla may justify an additional capital need by citing that demand exists to build more car and battery factories sooner rather than later, while also taking advantage of an open capital market," Barclays analyst Brian Johnson told CNBC.

In the first quarter of the year, Tesla managed to deliver 14,820 vehicles out of the expected 16,000 units. The figure caused market analysts to question whether Tesla can essentially turn itself from a niche automaker into a mass-market auto manufacturer. Tesla projected that it should be able to deliver between 80,000 and 90,000 units this year.

Right now, Tesla has a final assembly plant in Fremont, California, the same plant that was previously used by Toyota and General Motors on a joint venture that managed to produce at least 500,000 cars annually.

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