Tesla Engages Chinese Banks to Fund Its Shanghai Factory
(Bloomberg) -- Elon Musk’s shock $82 billion offer to buy out the loss-making Tesla Inc. has the market wondering just how he will find the cash. But when it comes to his grand plans to build electric cars in China, he already has the answer: the nation’s state-owned banks.
With a factory just outside of Shanghai key to Musk’s vision of making inroads in the world’s biggest electric-vehicle market and finally making Tesla profitable, the company has enlisted the city’s government as an ally.
Shanghai authorities are helping Tesla obtain loans from some of the biggest Chinese banks, according to people familiar with the matter. At least four lenders have begun an appraisal process on the loans, which will be used to fund the building of a factory that’s said to cost $5 billion to bring to full capacity. Some banks have signed confidentiality agreements with the Shanghai government and Tesla, and are in advanced negotiations, the people said.
The Shanghai government’s information office didn’t immediately respond to a faxed request for comment. A Tesla spokeswoman declined to comment.
The banks have yet to decide on the size of the loans and interest rates, said the people. Tesla has said it plans to use mostly local debt to fund the Shanghai factory, which Bloomberg News previously reported would require investment of $5 billion.
Local governments in China have been chasing and competing with each other to entice electric-vehicle manufacturing projects as the nation has a goal to lead the world in cars powered by electricity. Tesla negotiated for years with Shanghai’s government before inking a preliminary agreement in July to build the 500,000-unit-a-year factory in the city.
As the world’s largest car market, China is crucial to Musk’s goal of dominating electric vehicles. The billionaire tweeted that he is considering taking the money-losing company private at $420 a share and has secured the funding to do so. At that price, the electric-car maker would have a valuation of $82 billion.
©2018 Bloomberg L.P.