Tesla gets $520 mn funding for first Chinese plant

Andrew Cummings
March 11, 2019

According to a report in CNET late Friday, the investors sued the Tesla and SpaceX CEO, saying Musk's "ongoing unchecked misstatements on Twitter have hurt the electric vehicle maker".

On Thursday, Tesla announced that it roped in a host of Chinese lenders to mop up funds for its plant in China.

The US regulators slammed the Tesla CEO because he "once again published inaccurate and material information about Tesla to his over 24 million Twitter followers". The entire proceeds of the loan will be invested in the construction of the Gigafactory in Shanghai. For dollar-denominated loans, the rate is 1% more than Libor. Tesla said the term loan agreement was signed for a period of 12-months.

The fresh borrowing follows Tesla's largest-ever debt payment last week. Tesla is known to have cash reserves of $3.7 billion and equivalents as of late 2018.

The work on the giga-factory started in January and production will start by May.

"His conduct has not only cost Tesla shareholders dearly but threatens to expose the company to even greater liability and litigation in the future", the statement further said.

Musk previously said the Shanghai factory will produce Model 3 sedans and its upcoming Model Y SUV for the Chinese market. Vehicle sales plunged. The slump was more apparent in February, which was the ninth consecutive month of boring sales.

Retail sales of sedans, sport utility vehicles, multi-purpose vehicles and minivans fell 18.5% to 1.19 million units last month, according to the China Passenger Car Association Friday.

In the broader slowdown, battery-powered autos had been an exception.

It is more evidence of deteriorating demand in the world's largest vehicle market, which previous year contracted for the first time in two decades as the economy slowed and a trade war weighed on consumer spending.

China agreed to roll back the tariffs to 15 percent last December after Chinese president Xi Jinping and Donald Trump met at the G20 summit in Argentina for trade negotiations.

In July 2018, China raised tariffs on USA autos another 25 percent, (from 15 percent to 40 percent) amid ongoing trade tensions in response to the Trump administration's tariffs on $200 billion worth of Chinese goods. As a result, it will likely be a matter of years before Nio gets approval to build a Shanghai-based factory.

The new factory would double the size of Tesla's global manufacturing capabilities, Reuters said.

Keeping prices in check will also help Tesla fend off competition from a swathe of domestic electric vehicle startups such as Nio Inc, Byton and XPeng Motors.

Local manufacturing will also keep the company immune from the vagaries of any re-escalation of trade tensions between the USA and China.

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