Tesla plans to raise funds for its China factory
[BENGALURU] Tesla Inc is looking to raise a portion of the US$5 billion it needs to build its factory in Shanghai from local Chinese partners, Bloomberg reported on Wednesday, citing a source familiar with the matter.
Chief Executive Officer Elon Musk last month landed a deal to build the company's first plant outside the United States that would double the size of the electric car maker's global manufacturing.
"We expect some funding to be from China investors, but expect international (including the US) funding to be needed too," CFRA analyst Efraim Levy said.
Tesla did not respond to a Reuters request for comment.
China is the largest market for electric vehicles, and analysts predict that electric vehicle sales in the country will accelerate rapidly as government regulations aimed at having 100 per cent electric vehicles by 2030 roll out.
For Tesla, which is rapidly burning cash and struggling to turn a profit, China is a key market. The country accounted for about 17 per cent of its total revenue last year.
"In the long run, China will be the most important car market for Tesla by far where the company will earn more than a third of its money," NordLB analyst Frank Schwope said.
"A plant in China is the best way to avoid high tariffs. It's a kind of natural hedging."
However, following Tesla's announcement of building the Shanghai factory, analysts questioned the money-losing company's ability to get the capital required to build and staff such a large plant.
Mr Musk in the past has said Tesla would be profitable in the second half of the year and would not have to raise any money from investors.
In contrast, Wall Street had been speculating that Tesla would need to return to capital markets this year to raise more funds as it ramps up production of its Model 3 sedan, seen as crucial to the company's long-term profitability.
REUTERS
KEYWORDS IN THIS ARTICLE
BT is now on Telegram!
For daily updates on weekdays and specially selected content for the weekend. Subscribe to t.me/BizTimes
Transport & Logistics
Tesla profits tumble but shares rise on new vehicle plan
Tesla to cut more than 6,000 jobs across Texas, California
French air traffic controller strike threatens flight chaos
Tesla to accelerate launch of cheaper cars after sales miss
Heathrow faces further strike action in May from ground staff
Boeing bid for Spirit AeroSystems hits snag over Airbus assets