Tesla Raises Capex Guidance, Plans Outlay Of Up To $12B Over 2 Years

Tesla Inc TSLA operates in a capital-intensive industry, and the electric vehicle giant is stepping up investment to maintain its lead over the competition.

What Happened: Tesla's capex for fiscal year 2020 will likely come in at the high end of its guidance range of $2.5 billion to $3.5 billion, the company revealed in a Monday 10-Q filing.

The revision is due to the ramping of new products, the  Model Y and Solar Roof; the construction of manufacturing facilities on three continents; and  the development and manufacturing of new battery cell technologies.

The hike in capex also takes into account the pipeline of announced projects under development and all other continuing infrastructure growth, Tesla said.

More importantly, Tesla said it expects capex to increase to $4.5 billion to $6 billion in fiscal 2021 and 2022. 

Related Link: Tesla Has State Government Invite For Giga, R&D Hub In Bangalore

The company expressed confidence in meeting the capital needs with its cash flow from operations.

Better working capital management — resulting in shorter days outstanding than days payable outstanding — and sales growth are facilitating positive cash generation, the automaker said. 

"We expect our ability to be self-funding to continue as long as macroeconomic factors support current trends in our sales," according to Tesla. 

Why It's Important: Chinese EV start-ups such as Nio Inc – ADR NIO, and Xpeng Inc – ADR XPEV are going all out to innovate in order to give Tesla a run for its money.

Traditional automakers have also joined the party.

It becomes necessary for Tesla to invest in R&D and manufacturing to maintain technological superiority and over peers and to sustain its sales growth.

TSLA Price Action: At last check, Tesla shares were slipping 2.17% to $411.49.

Related Link: Tesla's Growth Will Lose Steam In Q4: Bear Analyst Gordon Johnson

Photo courtesy of Tesla.