Tesla is lining up about $2 billion in loans for Shanghai Gigafactory: analyst report

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Shanghai Mayor Ying Yong and Tesla Chairman and CEO Elon Musk pose in from of a plaque for the Tesla (Shanghai) Ltd. Electric Vehicle Development and Innovation Center.  

Source: Shanghai Municipal People’s Government 

Shanghai Mayor Ying Yong and Tesla Chairman and CEO Elon Musk pose in from of a plaque for the Tesla (Shanghai) Ltd. Electric Vehicle Development and Innovation Center.  

Tesla is lining up about $2 billion (more than 13 billion RMB) from Chinese lenders to build out its massive battery and car plant in Shanghai, according to research from JL Warren Capital.

JL Warren, a New York-based investment research firm that focuses on Chinese companies, as well as U.S. firms with significant exposure in China, wrote in a report last week that it expects backers of the Shanghai Gigafactory to include Shanghai Pudong Development Bank, Industrial and Commercial Bank of China, China Construction Bank and Agricultural Bank of China.

China represents a critical growth market for Tesla, and CEO Elon Musk talked up the company’s plans there on its latest earnings call in January.

“We need to bring the Shanghai factory online,” Musk said. “I think that’s the biggest variable for getting to 500,000-plus a year. Our car is just very expensive going into China. We’ve got import duties, we’ve got transport costs, we’ve got higher costs of labor here.”

According to JL Warren, which also tracks Chinese companies listed in the U.S., about $500 million (3.3 billion RMB) of Tesla’s new financing should apply to the first stage of the Shanghai Gigafactory build, with the total project loan amounting to about $2 billion.

Musk said in the fourth-quarter earnings call that Tesla would need “something in the order of $0.5 billion in CapEx to get to the 3,000 vehicle rate in Shanghai.”

JL Warren said the first stage of financing will likely have a 3.9 percent interest rate, below the Public Bank of China benchmark rate of 4.35 percent. That should help Tesla get its assembly line running to produce its initial 250,000 lower-end Model 3 electric sedans.

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