Chief Executive Elon Musk’s bold approach to cars, space exploration and clean energy has fueled investor enthusiasm for Tesla. But skeptics are waiting to see if Musk can fulfill his promise of producing 500,000 cars per year in 2018, or six times Tesla’s 2016 production.

Shares were down about 2% in after-hours trade following the results.

The automaker’s comments underscored the additional challenge of keeping up demand for its older models.

“We have seen some impact of Model S orders as a function of people being confused” that Model 3 is the upgrade to Model S, Musk said on a conference call.

Tesla said it had $4 billion of cash on hand as it headed into the second quarter and expects year-to-date capital expenditures to be slightly over $2 billion by the time it starts Model 3 production – within its previous targeted range of $2 billion to $2.5 billion.

That cushion should give the company some near-term breathing room from needing to tap Wall Street for cash, said CFRA Research analyst Efraim Levy. Tesla in March raised $1.2 billion from the markets.

Record deliveries helped Tesla boost its revenue to $2.7 billion in the quarter, but a net loss net widened to $330.3 million from $282.3 million a year earlier, largely driven by its SolarCity acquisition.

Tesla has much riding on the Model 3, which could finally make the cash-hemorrhaging automaker profitable. But while much of the company hype has focused on the car due in July, Tesla on Wednesday made a sales pitch for its overshadowed Model S.

Tesla is anxious that the $35,000 Model 3 – which will likely not be delivered in volume until 2018 – avoids cannibalizing the higher-margin Model S, which lists at about double the starting price.

CHALLENGES AHEAD

In its earnings release, Tesla stated that a key challenge for the company would be to eliminate misperceptions about the differences between the Model S and the Model 3.

“We want to be super clear that Model 3 is not version three of our car. Model 3 is essentially a smaller, more affordable version of the Model S with fewer features,” Musk said on a conference call, adding buyers erroneously thought the Model 3 would be more advanced.

“The Model S will be better than Model 3,” he added. “As it should be, as it’s a more expensive car.”

Tesla needs to ramp up for a deluge of Model 3 customers, and the company said it would be adding nearly 100 retail, delivery and service locations worldwide, representing a 30% increase. Tesla also said it was also working to improve efficiency, citing vehicle repair times that have fallen by 35% due to the use of remote diagnostics.

The company reiterated its forecast of delivering 47,000-50,000 Model S and Model X cars in the first half of 2017, a target it announced earlier this year.

Still, customer deposits fell 7% in the quarter, which could suggest interest in Tesla’s current product line, the Model S and Model X, is decreasing.

On a per-share basis, Tesla’s net loss narrowed to $2.04 from $2.13.

Excluding items, the company lost $1.33 per share. Analysts on average had expected a loss of 81 cents per share, according to Thomson Reuters I/B/E/S.

Tesla’s results reflect the first full quarter that includes solar panel installer SolarCity (SCTY), which it bought last year.

The Silicon Valley-based automaker last month became the most valuable U.S. carmaker by market capitalization, pulling ahead of Detroit’s auto heavyweights Ford Motor (F) and General Motors (GM).

Up to Wednesday’s close, shares of Tesla had risen 45.6% this year.