Tesla Secures 5-Year Worth $1.4B Loan For Shanghai Factory

Tesla, Inc. (NASDAQ:TSLA) recently secured a 10-billion-yuan ($1.4 billion), five-year loan from a group of China banks, in order to expand production at its Shanghai factory. Reportedly, part of this new loan will be used to roll over some of the company’s previous debt.

Tesla aims to utilize 3.5-billion-yuan of the new loan to roll over an existing debt, while the remaining amount will be invested in the company’s Shanghai factory as well as other China operations. The banks which have agreed to provide Tesla with financial aid include China Construction Bank (CCB), Agricultural Bank of China (AgBank), Industrial and Commercial Bank of China (ICBC), and Shanghai Pudong Development Bank (SPDB).

Earlier this year, these China banks had issued a 12-month loan of up to 3.5-billion-yuan for Tesla, slated to be repaid on Mar 4, 2020. The interest rate of the new loan will be the same as the 3.5-billion-yuan loan, pinned at 90% of China’s one-year benchmark interest rate.

The Shanghai factory is Tesla's first car manufacturing site outside the United States. It is anticipated to boost sales and will help avoid higher import tariffs imposed on U.S.-made cars. The company commenced production at the factory this January and aims to build at least 1,000 Model 3 cars a week by the end of this year.

Shares of Tesla have outperformed the industry it belongs to over the past year. Its shares have appreciated 41.9% compared with the industry’s rise of 35%.

Tesla is making efforts to improve vehicle deliveries, sequentially and annually, with some expected fluctuations due to seasonality. The company is confident in exceeding 360,000 vehicle deliveries this year. It expects positive quarterly free cash flow as well as net income, in the upcoming period, with possible temporary exceptions, particularly around the launch and ramp-up of newer products.

Zacks Rank & Other Stocks to Consider

Tesla currently carries Zacks Rank #2 (Buy).

Other top-ranked stocks in the Auto-Tires-Trucks sector include Weichai Power Co. (OTC:WEICY) , Spartan Motors, Inc. (NASDAQ:SPAR) and SPX Corporation (NYSE:SPXC) . While Weichai Power flaunts a Zacks Rank #1 (Strong Buy), Spartan Motors and SPX carry a Zacks Rank of 2, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Weichai Power has a projected earnings growth rate of 6.11% for the current year. Its shares have gained 83.8% over the past year.

Spartan Motors has an estimated earnings growth rate of 85.42% for the ongoing year. The company’s shares have surged 152.9% in a year’s time.

SPX has an expected earnings growth rate of 23.18% for 2019. The stock has appreciated 100.5% in the past year.

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