While preparing to commence full-fledged production at its Chinese factory, Tesla (NASDAQ: TSLA) is said to have secured a fresh loan of about $1.4 billion from a group of banks in the country. The financing comes at a time when the electric car maker is gearing up to roll out new models in China, including the latest Model Y. The stock gained about 1.5% during Monday’s pre-market trading.
In Expansion Mode
According to a report published by Reuters, a part of the five-year loan will be used for settling financing of about $500 million availed earlier this year from various banks, including China Construction Bank, Agricultural Bank of China, Industrial and Commercial Bank of China and Shanghai Pudong Development Bank.
It is learned that the remaining amount will be used for expanding Tesla’s China operations, including completion of the factory. The report said that the creditors are offering the loan at the ‘best’ interest rate, which is slightly below the one-year benchmark rate set by the country’s central bank.
Tesla’s CEO Elon Musk bets on the China facility to enhance profitability, as it would give the company access to the world’s largest automobile market while escaping the heavy tariffs imposed by the Chinese government on auto imports from the US. Currently, the focus is on increasing production and manufacturing more parts in China.
Recently, the Silicon Valley firm surprised the market with stronger-then expected third-quarter earnings even as revenues dropped 8%. Then, the management reaffirmed its production goals for the Shanghai factory, despite the lingering uncertainties related to the Sino-US trade war.
Last week, investor confidence got a boost after brokerage firm Credit Suisse issued a bullish statement on Tesla’s growth prospects, spurring a stock rally. The on-track China operation and progress achieved with regard to the European expansion added to the positive sentiment. The company is expected to provide updates on its production and delivery guidance at the Battery and Powertrain Investor Day to be held early next year.
Tesla’s stock gained about 1.5% during pre-market trading on Monday, after closing the previous session higher. The stock has remained on the upward trajectory since the last earnings report.
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