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Tesla Negotiates $565M Loan In China Amid Factory Shutdowns, Shrinking Sales

Tesla Inc (NASDAQ: TSLA) is yet again relying on debt to keep its operations going in China, with the electric vehicle manufacturer negotiating a loan facility, according to an 8-K filing with the SEC.

Benzinga · 05/11/2020 13:57

Tesla Inc (NASDAQ: TSLA) is yet again relying on debt to keep its operations going in China, with the electric vehicle manufacturer negotiating a loan facility, according to an 8-K filing with the SEC.

About Tesla's Loan 

Tesla has entered into a working capital loan contract with the Chinese commercial lender Industrial and Commercial Bank of China Ltd for an unsecured revolving facility of up to 4 billion yuan ($563,928,320).

Tesla said it intends to use the loan proceeds for expenditures related to production at its Shanghai Gigafactory. This new facility will mature on the first anniversary of the first borrowing under the loan.

The applicable interest rate will be equal to the market-quoted interest rate published by an authority designated by the People's Bank of China, minus 0.35% for yuan-denominated loans, or the sum of one-year LIBOR plus 0.8% for U.S. dollar-denominated loans.

What It Means For Tesla 

It was only in December that Tesla secured a $1.6-billion loan from Chinese banks to repay a previous loan and also to expand its Shanghai Gigafactory.

The negotiation of the loan facility comes at a time when Tesla manufacturing is shut down in both the China and the U.S. Last week, the EV maker said that it has halted production in its Shanghai Gigafactory according to plan, although reports suggested it could be due to shortage of components.

Earlier Monday, the China Passenger Car Association said Tesla's domestically made Model 3 vehicle sales dipped 64% month-over-month to 3,635 vehicles in April.

The broader EV market in China recovered by recording a 9.8% month-over-month increase.

Homegrown EV start-up Nio Inc – ADR (NYSE: NIO) reported last week that it delivered 3,155 vehicles in April, up 105.8% from the previous month.

Tesla shares were down 2.73% at $797.09 at the time of publication. 

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Photo courtesy of Tesla.