Tesla and China signed a deal about Electric Vehicles

Tesla and China signed a deal about Electric Vehicles

Tesla and China agreed. It might be a positive step towards the phase-one deal. The company released today a filing that confirms previous reports. Finally, Tesla was able to secure $1.6 billion in financing from Chinese banks. Chinese banks and Tesla want to finance its growing operation in the world’s largest electric vehicle market.

Last week, Chinese news was saying that Tesla and Chinese banks came to terms. They want to finance worth more than $1 billion (10 billion yuan).

Tesla filed a statement with the SEC today.

A subsidiary of Tesla, Inc. (“Tesla”) enters into the deal with a syndicate of lenders in China on December 18, 2019. The agreement will involve an unsecured revolving loan facility of up to RMB 2.25 billion and a secured term loan facility of up to RMB 9.0 billion. The use of the money will be for the connection with Gigafactory Shanghai. On December 20, 2019, the proceeds from one of the new facilities repaid the subsidiary’s drawn amounts fully on its existing bridge loan facility covering the RMB 3.5 billion. The full repayment took place.

Tesla China

In other words, Tesla used part of the new loans to pay the previous loans. The company plans to use the rest of the new loan to expand Shanghai’s Gigafactory 3.

They want to invest in more components locally. Gigafactory 3 makes these vehicles in China. Tesla already steadily produces and ships Model 3 vehicles. The company’s additional plan is to start Model Y production for the coming year. The next year Tesla will most probably invest in the production.

Tesla and the Agreement

Tesla (Shanghai) Co., Ltd. (“Tesla Shanghai) entered into a Fixed Asset Syndication Supplemental Agreement and Loan Agreement (together, the “Fixed Asset Facility”) on December 18, 2019. Lenders are China (Shanghai) Pilot Free Trade Zone Special Area Branch, Agricultural Bank of China Shanghai Changing Sub-branch, and China Construction Bank Corporation. Tesla Shanghai may, for three years, draw funds from time to time on a secured term facility. The loans will be for the expenditures related to production and construction.

The agreement also involved that Tesla Shanghai must repay principal amounts on a specified schedule. All outstanding loans will finish by the fifth anniversary of the first borrowing. Including a restriction on lines and other security interests on assets, Tesla Shanghai is subject to certain covenants. The company is also subject to certain customary events and agreements of default, other than specified exceptions.

All in all, on December 18, 2019, a Syndication Revolving Loan Agreement was made. Tesla Shanghai entered into the deal with the Lenders. The company can take funds sometimes on an unsecured revolving facility of up to a 2.25 billion Yuan. All outstanding loans will mature on the first borrowing’s first anniversary.

The agreement might is a positive step towards the phase-one understanding. In recent days around the U.S.-China trade deal, things are going well. Nevertheless, economists and traders are still careful. Already, the more-than-a-year long, trade war has hit hard the global economy. Now everyone concerning the deal is thinking positively. Many politicians see this deal as a sign of a positive outcome.