BEIJING/SHANGHAI -- Tesla Inc. and a group of China banks have agreed a new 10 billion yuan ($1.4 billion), five-year loan facility for the automaker’s Shanghai car plant, three sources familiar with the matter told Reuters. A part of the financing will be used to roll over an existing loan.
China Construction Bank, Agricultural Bank of China, Industrial and Commercial Bank of China and Shanghai Pudong Development Bank are among the banks that agreed to give Tesla the financial support, one source with direct knowledge said.
The Chinese banks earlier this year already offered Tesla a 12-month facility of up to 3.5 billion yuan, which is due to be repaid on March 4, 2020, according to a filing the automaker made to the U.S. Securities and Exchange Commission.
That new loan will be partially used to roll over the previous 3.5 billion yuan debt, according to the first source. The second source said the rest will be used on the factory and Tesla’s China operations.
The new loan’s interest rate will be pegged at 90 percent of China’s one-year benchmark interest rate, the same as the 3.5 billion yuan loan, the first source said. This is a rate that China banks offer to their best clients.
Tesla, CCB, AgBank, ICBC and SPDB did not immediately respond to Reuters’ requests for comment.
The factory, which is Tesla’s first car manufacturing site outside the United States, is the centerpiece of its ambitions to boost sales in the world’s biggest auto market and avoid higher import tariffs imposed on U.S.-made cars.
The Shanghai government has also thrown its support behind the Tesla project, which would be China’s first wholly foreign-owned car plant and a reflection of the government’s broader shift to open up its car market.
CEO Elon Musk is counting on the China plant to help build on recent momentum for the company in the world’s largest market both for electric vehicles and autos in general. Tesla’s new-car registrations in China climbed to a five-month high of 5,597 in November, compared with 393 a year earlier, according to state-backed China Automotive Information Net.
Tesla’s China-built Model 3s are set to start at about $50,000, slightly cheaper than imported versions. The company may lower the price of locally assembled sedans by 20 percent or more next year as it starts using more local components and reduces costs, people familiar with the matter have said.
Bloomberg contributed to this report.