Tesla (TSLA - Get Report) is remodeling its factory in Fremont, California, order to make way for production of the Model Y crossover SUV, as well as a refreshed version of the Model S, sources told CNBC.
The moves could raise costs for Tesla in the near-term at a time when rising costs have resulted in CEO Elon Musk promising to personally review every 10th page of outgoing expense reports.
However, the move also puts Tesla in a position to take advantage of the bustling SUV market in the U.S., which has been carrying the automotive sector for years amid falling sedan sales.
Tesla will have to combine the Model S and Model X production lines into one, according to CNBC. The company is reportedly targeting a September start for production of the new version of the Model S.
Tesla already laid off a portion of its Model S and X production staff in the first quarter and cut hours for the employees that survived.
Tesla shares are rising on the news, climbing into positive territory after spending most of Wednesday's session in the red. Tesla shares were up 0.1% to $188.89 on Wednesday.