Wednesday, 20 March, 2019

Tesla reaches US$521M China bank-loan agreement for Gigafactory

Tesla cars at a port in Shanghai. The US electric carmaker is popular in China- the world's biggest car market- but Chinese brands are catching Tesla enters into agreement with Chinese lenders for Gigafactory
Priscilla Morrison | 10 March, 2019, 15:31

Electric carmaker Tesla has won US$521 million (S$708.4 million) in loans from Chinese banks to build its first overseas plant near Shanghai, making it the first foreign automaker to wholly own a factory in China.

"Aiming to finish initial construction this summer, start Model 3 production end of year & reach high volume production next year", Musk had tweeted, adding that "Shanghai Giga production of Model 3/Y will serve greater China region".

The electric auto maker disclosed that it has signed a syndicated loan agreement with local branches of banks including China Construction Bank, Agricultural Bank of China, Industrial and Commercial Bank of China, and Shanghai Pudong Development Bank.

Tesla shares rose more than two per cent in after-hours NY trading. For dollar-denominated loans, the rate is 1% more than Libor. Guests look at a Tesla Model 3 during a ground-breaking ceremony for a Tesla factory in Shanghai on January 7, 2019.

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China is by far the world's biggest vehicle market and sales there have been on an upwards trajectory for years, although they slipped 2.8 percent in 2018. Beginning local production in China is key for Tesla to reduce the costs of its cars in what is the world's largest market for electric vehicles.

Manufacturing locally is expected to help Tesla avoid some of the effect of trade tensions between the United States and China, as well as reduce its production costs.

In its filing, Tesla stated it had modified its asset-backed lending credit agreement with a syndicate of banks, boosting revolving commitments by $500 million to an overall of $2.425 billion, while extending the maturity duration of the agreement by three years.

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