Analysts claimed that Tesla Inc.'s financial agreements with China may be subjected to the Securities and Exchange Commission (SEC) inquiry. They think that the company had incurred a delay in recognition of its capital expenditures.
Last week, the electric car maker Tesla Inc. disclosed its financial arrangements in China. Analysts then claimed that the company may be facing an SEC inquiry as the reports showed that there may have been delayed recognition of its capital expenditures.
According to market expert and Evercore analyst, Chris McNally released a report last February 14, 2020, that indicated the company shares the equivalent of a sell. The information showed that Tesla spent only 1.3 billion USD on CAPEX last 2019 and that this value is over half of its budget at 2.5 billion USD.
McNally then suggested that Tesla's Shanghai factory and limited CAPEX may be under review by the SEC. The company, however, disclosed a regulatory filing last week after it was subpoenaed by the SEC last December 4, 2019.
The company as said to be under review on its certain financial data and contracts engaged in such as its regular financing arrangements in China. In that filing, Tesla allegedly claimed that it had lodged a significant amount of investments in its factory in Shanghai. The report also claimed that it would provide more investments into Shanghai through local debt financing.
Last December, Tesla also disclosed that it had prepared 11.25 billion yuan in financing from local banks for its Shanghai plant. The said plant was reported to be the production factory for the Tesla Model 3 sedans starting in the fourth quarter of 2019.
In an official statement, Tesla claimed that they are supplementing their financing with limited direct capital expenditures. It also revealed that these yielded a lower cost per unit of production capacity compared to its Model 3 production in its Fermont factory. Thus, the company claimed that the production of the vehicle costs more in California compared to its Shanghai plant.
Tesla has also been reported to have gained straight quarterly profits. However, the report claimed that several analysts remain skeptical over the company's earnings power since it has increased its expenditures. The increase was set by its chief executive officer Elon Musk on his plans to create new products and additional factories.
At present, the company has announced that it would roll out its latest vehicle Tesla Model Y crossover this quarter. It would also start production for its Semi model in 2020 and would open a manufacturing plant near Berlin by 2021. Lastly, the company is also set to launch its Cybertruck and Roadster models soon.
