By Paul Lienert and Tenzin Pema
(Reuters) - Elon Musk's latest "master plan" for Tesla Motors Inc (O:TSLA) to develop an electric commercial truck, a public bus, a pickup and systems to enable fully autonomous driving could cost $2 billion to $3 billion or more, experts and analysts said Thursday.
Musk did not lay out a budget for his latest strategy, revealed on Wednesday, to expand Tesla into a broader range of vehicle markets as well as ride services and solar energy systems. The Tesla chief executive also did not explain how the company planned to pay for the new products he envisioned.
However, analysts said it is likely Tesla will have to go back to investors for more capital to fund the plan, despite raising about $1.7 billion with a sale of shares in May.
"It's beyond us how much fundraising Tesla will need to carry out this master plan," Barclays (LON:BARC) Capital analyst Brian Johnson wrote in a research note.
Standard & Poor's on Thursday cut its rating on Tesla to "sell" from "hold", saying that while the new plan may build "a long-term technological monument, we think it will create a short-term cash flow sink hole."
Tesla shares fell 3.4 percent on Thursday to $220.50.
Up to Wednesday's close, the company's shares had risen 5 percent since July 8 after Musk tweeted that he was working on a second master plan for the company he founded in 2003.
Musk sketched out a vision for Tesla to become an integrated carbon-free energy enterprise offering products and services beyond electric cars and batteries.
Proposals to develop a compact pickup truck, a sport utility vehicle, electric semi trucks and buses were seen as the most expensive elements of the plan.
The SUV and pickup could cost $500 million to $750 million each for components and production equipment, assuming they borrowed elements from the automaker's current vehicles, said Michael Tracy, a manufacturing expert with The Agile Group in Detroit.
Development and production of an electric semi truck and bus could cost up to $500 million, according to Mark Wakefield of advisory firm AlixPartners.
A four year old Salt Lake City startup, Nikola Motor Co, plans to unveil in December a working prototype of a natural gas/electric heavy duty semi-trailer truck designed for road haulage.
Nikola Chief Executive Trevor Milton told Reuters on Thursday he respects Musk, but “Tesla better be willing to round up $5 billion and be willing to spend it” to develop an electric semi truck that can compete in the over-the-road market. The effort could take five to nine years, Milton said.
Nikola plans to begin producing its Nikola One trucks within 36 months, and has 7,300 orders, he added.
Tesla would also be playing catch up with established players in the heavy truck market such as Daimler AG (DE:DAIGn) and PACCAR Inc (O:PCAR). Both are among the participants in a U.S. Department of Energy "Super Truck" program to build a more efficient heavy truck. Daimler said it has matched a $39.6 million federal grant as part of the program.
Analysts questioned whether a fully electric long-haul freight truck would be practical. "Imagine the battery needed to make a cross country trip," UBS Securities analyst Colin Langan wrote in a report.
However, Morgan Stanley (NYSE:MS) analyst Adam Jonas said "intelligent" trucks that use automated driving technology to enable vehicles to run around the clock, and operate in closely-packed platoons, could cut shipping costs by 30 to 50 per cent from current levels.
Another expensive element of Musk's strategy is developing technology to pilot fully self-driving cars, trucks and buses. Musk said he wants self-driving cars that are ten times safer than a human driver. Analysts estimated that effort could consume $400 million to $800 million or more.
Musk and Tesla Chief Financial Officer Jason Wheeler told investors in May Tesla planned to accelerate the launch of its more affordable Model 3 sedan, aiming to build 500,000 a year by 2018. They said capital spending for the coming year would rise 50 per cent from previous forecasts to about $2.25 billion.
Following its share sale, Tesla said it had nearly $2.9 billion on hand, including cash drawn from its credit line. Musk has said he expects Tesla to stop burning cash by the end of this year. Analysts are skeptical Tesla can fund the previous plan to accelerate Model 3 production, and the new ventures, without taking on more debt or launching another share sale.
In delivering on its original master plan, Tesla "... dug a $4.2 billion hole on the financial side that has necessitated a series of fund raises totaling $6.2 billion," Barclays' Johnson said.
Of the 17 brokerages covering Tesla’s stock, four rate it "buy" or higher and eight "hold", while five recommend "sell". The median price target is $234.