US Electric vehicle manufacturer Tesla has reportedly reached an agreement with a group of Chinese banks for a substantial loan that will be used towards the company's Shanghai Gigafactory. The Chinese banks have apparently agreed to loan Tesla $1.4 billion over a five-year period.
According to reports citing sources with knowledge in the matter, the loan will also be used to roll over Tesla's existing debts. The source claims that the banks involved in the agreement include the China Construction Bank, the Industrial and Commercial Bank of China, Shanghai Pudong Development Bank, and the Agricultural Bank of China.
The new five-year loan facility will be on top of the loan Tesla took out with the banks earlier in the year. The previous loan was a 12-month loan facility of up to $500 million. According to Tesla's filing with the US Securities and Exchange Commission (SEC), that loan is scheduled to be repaid by the company in March 2020.
Tesla had reportedly been offering the best interest rates available in the region at just 90 percent of the country's one-year benchmark interest rate. This was the same rate offered to the company for its first loan.
Part of the $1.4 billion loans will be used to roll over the company's $500 million debt, while the rest of the money will be used on the company's Shanghai Gigafactory. The facility, which is otherwise known as Gigafactory 3, is currently under construction and is expected to go into full operation next year.
The factory will be producing the company's battery cells, Tesla Model 3, and Tesla Model Y electric vehicles for the Chinese and Asian markets. The facility is located within Shanghai's Pudong District just on the edge of the Fengxian District.
The completion and full operations of Tesla's Shanghai Gigafactory will be a huge milestone for the company as it is part of its wider ambitions to expand into the world's largest car market. Establishment its own production facility in the country also allows Tesla to avoid the issue of paying higher taxes amid the tit-for-tat tariffs imposed by China and the United States against each other's products.
Tesla has so far received huge support from local and national governmental agencies in China. Tesla's facility, which is its first manufacturing plant outside of the United States, will serve as China's first wholly foreign car plant. It is being seen by the government as a clear reflection of its intention to further open up its markets to the rest of the world.
