LOS ANGELES/DETROIT, Oct 31 (Reuters) - Tesla Motors Inc expects to close a financing round of over $20 million from existing investors as soon as next week to bolster a cash balance now at $9 million, said Elon Musk, founder and chief executive of the electric car start-up.
Musk, who became a billionaire by founding PayPal, said he would personally ensure that the San Jose, California company would have enough cash to deliver all of its orders for the $109,000 Tesla Roadster, the first battery powered sports car.
“I’ve gone on record as saying that I am personally standing behind delivering the cars and the deposits for the company,” Musk told Reuters late on Thursday.
“I have the means and wherewithal to do so. So people should have absolutely zero concern about their deposit.”
Tesla has delivered less than 60 Roadsters despite having taken over 1,200 orders.
It has taken deposits of between $5,000 and $60,000 for those Roadster orders under a contract that specifies those funds can be used for Tesla’s working capital, Musk said.
But like established automakers, Tesla has been hit hard by the recent turmoil in financial markets as well as cost overruns and production delays for the Roadster.
When Tesla failed to secure a $100-million investment round earlier this month, Musk cut 24 percent of the company’s work force and delayed development work on a battery-powered electric sedan, known internally as the “Model S.”
He also took the CEO post from Tesla’s former chief executive, Ze‘ev Drori.
“We didn’t raise the $100 million but we still need to raise some money to get to cash flow positive,” Musk said. “We actually probably only need on the order of $20 million to do that. We’re going to raise more than that, but we only need about $20 million.”
He added that the financing would come from existing investors in Tesla.
“My expectation is next week is likely,” Musk said when asked about the timing.
Musk was speaking after an apparently disgruntled Tesla employee posted a letter to a Silicon Valley blog that suggested Tesla was running out of funds after a financial briefing for employees this week.
“It’s a bit silly. If we had almost no money in the bank then one could say that we are about to run out of money. But I think it’s kind of silly to say that with $9 million in the bank,” Musk said.
In addition to the new financing round from investors, Tesla also expects to secure another $200 million in still-pending loans from the U.S. Department of Energy.
The San Jose, California-based company is counting on the taxpayer-backed loans to offset up to 80 percent of the development cost of the Model S. Tesla has said it expects that car to cost $60,000 and compete against the likes of the BMW 5-Series for luxury and performance.
Though Tesla is among the most high-profile makers of electric vehicles, it faces intense competition from established automakers like General Motors Corp (GM.N) and Nissan Motor Co Ltd (7201.T), and upstarts like Chinese battery maker BYD Co Ltd (1211.HK)
Editing by Kim Coghill