Electric Vehicle manufacturer Tesla (NASDAQ: TSLA) has secured $1.4 billion in funding from Chinese banks, giving the company capital to continue its expansion.
The funding comes in the form of a 5 year loan from the China Construction Bank, the Industrial and Commercial Bank of China, the Agricultural Bank of China, and the Shanghai Pudong Development Bank.
China is one of Tesla’s most important markets. The company’s new Chinese Gigafactory is the only Tesla plant located outside of the U.S.
How Will Tesla Use Its Massive Loan?
Tesla has announced that it will use around 35% of its loan to roll over existing debt. The rest will be used for direct investment in its Shanghai factory and other Chinese business operations.
The Chinese factory is a milestone achievement for Tesla. It is already operational, but the new funding will allow it to head towards full production. By making its popular electric vehicles in China, Tesla can avoid the heavy tariffs that are applied to American cars. China is the world’s largest electric vehicle market. When data was compared in 2018, Chinese consumers bought almost three times the number of electric cars as their American counterparts.
China’s huge population and growing middle class could potentially mean that Tesla ends up selling most of its vehicles in the country. Recently announced government subsidies will also be hugely beneficial, allowing them to remain competitive with local brands and large automotive companies like Toyota, BMW, Mercedes Benz, and GM.
Investors Confident in Tesla Stock
The new funding and Tesla’s overall progress in China should help to sustain investor confidence in the new year.
Share price has gone as low as $176.99 in the last year but closed at $425.50 during after-hours trading on Christmas Eve. This is the highest price that has been seen so far, and it reflects optimism for Tesla’s future.
Investors understand that the company has significant advantages over its competitors. Its technologies are mature, and it has more usable on-road data than any other manufacturer. Its battery technology is advanced, allowing Tesla cars to offer longer range and higher performance than others. Electrification is increasingly seen as inevitable for the automotive industry. While other manufacturers will struggle to adapt, has built itself, from the ground up, as an electric vehicle leader.
Investors looking for a promising auto stock can consider this option for the end of 2019.
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