Telsa is taking a new loan of $1.4 billion from Chinese Banks for Shanghai Factory

United States electric vehicle maker Telsa Inc. (TSLA) and a group of Chinese banks have agreed a new 10 billion Yuan (approximately $1.4 billion), five-year loan facility for the automaker’s Shanghai car plant. This news is based on the account of sources who are familiar with the matter. The sources further revealed that part of the loan will be used to roll over an existing loan.

A source with direct knowledge on the matter disclosed that China Construction Bank (CCB), Agricultural Bank of China (AgBank), Industrial and Commercial Bank of China (ICBC) and Shanghai Pudong Development Bank (SPDB) are among the banks which have agreed to give Tesla the financial support.

According to a filing made by the electric vehicle maker to the United States Security and Exchange Commission, at the beginning of the year, the Chinese banks had already offered Tesla a 12-month facility of up to 3.5 billion Yuan. This loan is due to be repaid on March 4, 2020.

According to the first source,  the new loan will be partially used to roll over the previous 3.5 billion Yuan debt. The second source disclosed that the remaining will be used on the factory and Tesla’s China operations.

This new loan has its interest rate pegged at 90% of China’s one-year benchmark interest rate, which is the same as the 3.5 billion Yuan loan, the first source said. This is a rate that Chinese banks offer to their best clients.

Tesla broke ground on the factory in January and has started producing vehicles from its Shanghai plant and it aims to build at least 1,000 Model 3 cars a week by the end of this year.

This Shanghai factory will be Tesla’s first car manufacturing site outside the United States and is the centerpiece of its ambitions to boost sales in the world’s biggest auto market and avoid higher import tariffs imposed on United States-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.

Management of Telsa and all the banks who are going to be offering Telsa the $1.4 billion are yet to make any statements concerning the loan.

After the news of Telsa taking a loan for the development of its Shanghai's factory broke, its share price rose to an all-time high. The shares hit the $420 mark on Monday. The all-time high share price of Telsa represents a 125% rebound from its lowest point of $185.16 at the end of May this year. This symbolic mark was celebrated by Elon Musk as he returned to the social media platform.

Tesla was founded by Elon Musk and he currently controls the company.