Tesla gets $708m in loans for first factory in China

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 up.
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 up.PHOTO: REUTERS

SHANGHAI • 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.

The funding, announced on Thursday, is a major boost for the California-based firm, which has been in negotiations with Beijing for years over building the plant in the world's biggest electric car market.

Tesla will make its Model 3 sedans at the factory, initially targeting 3,000 cars a week before ramping up annual production to 500,000. It aims to have the factory fully operational by the end of the year.

Tesla chief executive Elon Musk visited China in January to break ground on the factory, where he said he planned to approach local banks for money to build the plant and start production.

Mr Musk is betting on China's growing market for electric cars as Beijing pushes the industry away from fossil fuel vehicles.

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

Tesla will make its Model 3 sedans at the factory, initially targeting 3,000 cars a week before ramping up annual production to 500,000. It aims to have the factory fully operational by the end of the year.

According to a regulatory filing, Tesla secured the funds from four Chinese banks - the Industrial and Commercial Bank of China, the Chinese Construction Bank, Agricultural Bank of China and the Shanghai Pudong Development Bank.

Tesla shares rose more than two per cent in after-hours New York trading.

China is the world's biggest car market. Sales there have been on the rise for years, although they slipped 2.8 per cent last year.

Sales of electric vehicles and hybrids have also continued to swell, jumping 62 per cent last year, but still make up just four per cent of overall sales in China.

While Tesla remains in the lead, it is followed by three Chinese brands - BAIC, BYD and Zotye - according to data from automotive market intelligence company Jato Dynamics.

AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on March 09, 2019, with the headline 'Tesla gets $708m in loans for first factory in China'. Print Edition | Subscribe