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Tesla Secures 4B Yuan Loan For Shanghai Giga Expansion

support@smarteranalyst.com (Ben Mahaney)

Tesla (TSLA) has now secured a 4 billion yuan ($565M) lending line for continued expansion of production at the Gigafactory Shanghai, a filing has revealed.

Tesla Shanghai Co, a subsidiary of the electric-vehicle maker, entered into a Working Capital Loan Contract with the Industrial and Commercial Bank of China Limited.

Under the agreement, the company may draw funds on an unsecured revolving facility of up to a total of 4 billion yuan- and can only use the funds on the Shanghai plant.

The plant is currently out of action, reportedly due to supply disruption, with Tesla stating on May 7: “Tesla Shanghai is adjusting to normal production due to test run[s] and maintenance of production lines that were carried out during the recent holidays.” Notably Tesla did not say when production would recommence, simply adding: “All work is being executed according to plan.”

Outstanding borrowings under the agreement will accrue interest at a rate of either the market quoted interest rate published by an authority designated by the People’s Bank of China minus 0.35%, or for US dollar-loans, one-year LIBOR plus 0.8%.

Merrill Lynch analyst Ming-Hsun Lee recently upgraded TSLA stock from hold to buy. “In March-April, [Chinese] auto demand at premium segment recovered faster than at mass-market,” Lee explained. “Tesla sales were strong, while [the company] also posted April monthly deliveries of 3,155 units.”

However the majority of analysts present a cautious outlook on shares. The Hold consensus is based on 10 recent Hold ratings, 10 Sells and 7 Buys. With shares almost doubling year-to-date, the $627.40 average price target now translates into 23% downside potential from current levels. (See Tesla’s stock analysis on TipRanks)

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