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Amid Model 3 Hoopla, Tesla’s Losses Mount

As Tesla begins ramping up production of its crucial Model 3 sedan, the company on Wednesday reported a second-quarter net loss of $401.4 million.

The loss, which comes to $2.04 a share, was better than analysts had expected but still 37% higher than what the company reported in the same quarter last year.

Tesla recorded revenue of $2.79 billion in the second quarter, up 34% from a year earlier.

The company said it used up $1.16 billion of cash during the quarter, but it has $3 billion cash on hand, enough for “sufficient liquidity.”

Efraim Levy, equity analyst at CFRA, said he believes that will carry the company through 2017, but “we do think a capital raise in 2018 is likely to support production of the Model 3.” He retained his sell recommendation on the stock.

The report comes days after the company began selling its long-awaited Model 3 [pictured above], which the earnings release called “a huge milestone.”

The future of the company hangs on the Model 3, described as a mid-market car with a price range of $35,000 to $60,000. The company delivered the first 30 to buyers July 28, all of them Tesla employees. A hundred more will be built in August, 150 in September, followed by a ramp up to 5,000 a week by the end of December, the company said.

Tesla, which sold 76,000 Model S and X luxury cars in 2016, said it plans to turn out 500,000 cars by the end of 2018.

But to get there, Tesla faces six to nine months of “manufacturing hell” and “production hell,” Tesla Chief Executive Elon Musk told workers and reporters last week.

If Model 3 sales meet Tesla’s expectations, the federal government’s $7,500 consumer credit per vehicle will run out for its customers, with unknowable effects on Model 3 sales. The company is lobbying…

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