The pressure is on for Tesla’s Model 3.

If Tesla’s latest model fails to produce margins, the popular automaker could potentially be spending more than $1 billion a quarter, said an analyst.

“[Tesla has] a billion dollars of capital spending per quarter. So they could be burning through more than a billion dollars per quarter over the next couple of quarters,” Toni Sacconaghi, a senior technology research analyst with AB Bernstein, said on Thursday.

“That’s why there’s real sensitivity to what the margins are on the Model 3. If they are weak, they are going to be burning through more. If they are better, then the cash burn may be about that [billion-dollar] level,” Sacconaghi told CNBC’s “Power Lunch.”

Analysts aren’t expecting the automaker to make a profit for the next two quarters, said Sacconaghi, while the Tesla bulls vs. Tesla bears debate intensifies.

“I think this story is all about, can Tesla build in volume the Model 3, do so profitably and do so at a good and high-quality level? It’s really all about execution,” Sacconaghi said.

If the automaker can push through “manufacturing hell” and meet its gross margin targets, the stock will “do well from here,” said Sacconaghi. However, Tesla bulls are questioning whether those targets are realistic.

“Manufacturing is going to go up fivefold, and Tesla is striving to achieve margins on the Model 3 of 25 percent [in 2018],” Sacconaghi said. “They’ve struggled to achieve that margin level on the Model X, which has an average selling price of over $100,000. The Model 3 starts at $35,000.”

Tesla bulls fear that a miss on margins could lead Tesla to potentially run out of cash.

“The bull/bear debate on the stock is highly polarized,” Sacconaghi said. “The bears would say [Tesla is] spending $2 billion in capex (capital expenditures), and if they can’t get margins on this product they’re going to drain cash and they may run out of cash.”

The company expects that the Model 3 should deliver positive gross margins in the fourth quarter, according to a letter to shareholders.

Tesla surged 6 percent after posting a narrower-than-expected loss for its second quarter, leading Tesla bears to lose more than half a billion dollars Thursday. The automaker’s stock is up more than 62 percent year to date.

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