Tesla’s Shanghai Gigafactory To Cushion US-China Trade War Impact

Irving Hamilton
March 11, 2019

In the meanwhile, locally sourced funding is coming nicely together; a Dollars 521 million credit line agreement is closed between the United States company and a syndicate of Chinese investors.

Tesla's China borrowing follows its biggest ever debt payment recently.

The work on the giga-factory started in January and production will start by May.

The new plant will eventually have an annual production capacity of 500,000 vehicles, the California-based company has said, dramatically increasing its output.

"His conduct has not only cost Tesla shareholders dearly but threatens to expose the company to even greater liability and litigation in the future", the statement further said.

The short to medium term outlook on vehicles market in China is weak.

The loan accrues interest at 90% of the one-year rate published by the People's Bank of China for RMB-denominated loans and LIBOR + 1.0% for USA dollar-denominated loans.

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Localizing auto production will help Tesla to minimize the impact of the U.S.

Nio has shelved plans to build a Shanghai factory given the uncertainties in China's EV market this year, and plans to continue making its cars via an original equipment manufacturer. It already forced Tesla to rework its prices of USA -made cars in the China market.

China agreed to roll back the tariffs to 15 percent last December after Chinese president Xi Jinping and Donald Trump met at the G20 summit in Argentina for trade negotiations.

The loans from local banks will be used for the construction of Tesla's factory, expected to be finished by May, with the production of vehicles and batteries to begin by the end of 2019.

Tesla has said the Gigafactory will cost around $2 billion, and could help the company buffer against the ongoing trade war between the U.S. and China.

The new factory would double the size of Tesla's global manufacturing capabilities, Reuters said.

However, in the company's financial disclosure last year, it shows that NIO's current agreement with JAC Motors puts itself at a disadvantage as JAC receives a fee from NIO for every vehicle that is manufactured and the EV startup also has to compensate JAC Motors for any losses sustained during the first 3 years of the deal.

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