What happened: Tesla is looking for about $2 billion (RMB 13 billion) in loans for its Gigafactory 3 project in Shanghai, the company’s first production base outside of the US. A slew of local state-owned banks are expected to provide the massive loans jointly to the US EV giant, including Shanghai Pudong Development Bank, Industrial and Commercial Bank of China, China Construction Bank, and others, according to New York-based investment research firm JL Warren Capital. The interest rate for the first stage of financing will probably be 3.9%, below the current 4.35% benchmark rate set by China’s central bank.
Why it’s important: China represents a critical growth market for Tesla, as Beijing vigorously promotes electric vehicles amid environmental concerns and new energy ambitions. More than 1.25 million electric cars were sold in China in 2018, and the central government wants to hit 7 million by 2025. Without a production base in China, Tesla doesn’t qualify for government subsidies, driving the price of its Model S to $140,000 compared with the $80,000 price tag in the US.