Musk Says Tesla Plans to Build New Factory for Model Y Crossover

Tesla Inc., which has leveraged a single assembly plant to become one of the world’s highest-valued automakers, has another one coming.

The electric-car maker’s factory in Fremont, California, is “bursting at the seams” making Model S sedans, Model X crossovers and preparing for the upcoming Model 3 car, Chief Executive Officer Elon Musk told shareholders Tuesday. Tesla is deciding the location for a plant to build the Model Y, a smaller crossover scheduled to arrive as soon as late 2019.

“There’s just no way we could do Model Y at Fremont,” Musk said during Tesla’s annual meeting in Mountain View, California. “So it’s going to have to be somewhere else.”

Tesla has surpassed General Motors Co., Honda Motor Co. and Ford Motor Co. in market capitalization this year, driven by anticipation of strong demand for its most affordable car yet, the Model 3. While Musk’s vehicles may be getting cheaper, Tesla’s second assembly plant will almost certainly be more costly. The company inherited the Fremont factory from a Toyota Motor Corp. fire sale in 2010 for just $42 million.

Musk’s talk of another assembly plant is the latest example of the CEO’s outsize ambitions signaling more strain for Tesla’s balance sheet. The company has estimated the battery gigafactory it’s constructed near Reno, Nevada, will eventually end up costing about $5 billion. The CEO said Tuesday Tesla may end up building 10 to 12 gigafactories.

Since its June 2010 debut as a public company, Tesla has conducted 10 offerings of new equity or debt, according to data compiled by Bloomberg. Most recently, the company raised $1.4 billion selling stock and convertible bonds in March.

Model Y

Tesla is slated to begin producing the Model 3 next month and will unveil an electric semi truck in late September, Musk said. The Model Y will be built on its own platform and probably will draw more demand than the Model 3 eventually, he said.

Musk answered questions that Tesla fans and shareholders submitted using Twitter. He said the company plans to announce two or three new directors to join the board in the next month or two.

The annual meeting opened with Tesla’s general counsel announcing that investors voted against a shareholder measure to declassify its board, meaning directors would have been subject to annual elections rather than voted on every three years. The proposal was put forth by Connecticut pension funds that have been critical of Tesla filling its board seats almost entirely with directors who are personally or professionally tied to Musk.

Tesla shares climbed 1.6 percent to close at $352.85 on Tuesday, a record high. The company’s market value has jumped to about $58 billion, just behind BMW AG, according to Bloomberg data.

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