Tesla will issue $1.5 billion in debt to begin Model 3 production

On Monday morning, electric vehicle manufacturer Tesla announced that they plan to raise $1.5 billion in additional capital.

The money will be used to strengthen their balance sheet as production of the Model 3 ramps up, as well as general corporate purposes. In the past when Tesla has been short for cash, the company turned to sales of stock. This time around though they are going for a different approach of issuing debt.

Tesla plans to issue $1.5 billion in senior unsecured debt obligation notes, which will be due in 2025. Specific interest rates and redemption prices are yet to be determined but this move hasn't been too worrisome for investors. Rather, Musk is showing his company's commitment to them by not diluting their stock with an equity sale. Tesla's stock (TSLA) is up roughly 65% this year so selling on the public market makes sense, but it would certainly strain relationships with some investors.

Tesla plans to spend around $2 billion more by the end of 2017, which leaves them with about $1 billion in reserve. This is in addition to the $4.5 billion debt they have picked up in the last 12 months. This all seems like a lot of money, but Tesla plans to use the new funds to increase production capacity from 100,000 to 500,000 vehicles per year by the end of 2018. If everything goes as planned, Tesla could be seeing revenue of over $20 billion per year.