Tesla’s Shanghai Super plant has delivered its delivery promises ahead of schedule, thanks to exceptional construction speeds. After more than a decade of preparation, Tesla delivered its first domestic model 3 midsize sedan to 15 employee owners at its Shanghai super plant on December 30 last year, and Tesla plans to deliver large-scale deliveries to local users from the end of this month.
It can be said that Tesla’s factory in China all the way smooth, from the land to the loan has been the Shanghai Municipal Government’s strong support. Just a week before the Model 3 was delivered, Tesla received a five-year, 10 billion yuan loan from banks such as China Construction Bank, Agricultural Bank of China, Industrial and Commercial Bank of China and Shanghai Pudong Development Bank at a rate of only 90% of the one-year benchmark rate, or 3.915 percent, which is equivalent to enjoying it. The lowest interest rate that the best state-owned enterprises can get.”
Tesla’s three loans in China have reached Rmb18.5bn, more than the $2bn previously estimated by Tesla CEO Elon Musk, as several banks have increased. Tesla’s “super-national treatment” has raised questions from industry insiders and netizens as a number of new car-building forces in the country fret over funding problems.
“Repayment by loan” questioned by all parties
The country’s big banks seem to have been increasing their trust in Tesla. In March 2019, Tesla received its first loan of 3.5 billion yuan from China Construction Bank, Industrial and Commercial Bank of China, etc. Seven months later, Tesla received another 5 billion yuan in loans from China Merchants Bank. It is worth noting that both loans were relatively lenient. According to people familiar with the matter, some of the 10 billion yuan loan will be used to extend the 3.5 billion yuan of debt due on March 4, 2020 (the so-called “extension”, that is, loans can not be repaid due, approved for extended repayment time), and the rest of the funds will be used to support the Shanghai plant and Tesla’s remaining Chinese operations.
By contrast, the days of new forces of home-grown car-building have been difficult. NIO Auto motive reported better-than-expected third-quarter results, but the company’s tight cash position “remains an open issue.” “There has been significant positive progress in financing through the sale of shares or bonds,” The Shanghai-based company, which has been operating for 12 months without adequate financial support, said on a earnings conference call. “Although NIO Has been making significant cuts and starting to cut back on marketing spending, its financial position remains very tight.
Tesla’s easy $10 billion loan in China, still in debt, has to be questioned. Tesla’s net loss reached $702 million in the first quarter of last year, while its net loss reached $390 million in the second quarter, despite a record 95,000 deliveries, the data showed. Tesla didn’t turn a profit until the third quarter, but made a profit of $148 million, so the company lost about $940 million in the first three quarters. Two quarters of continued losses have left international capital markets unimpressed with the electric car giant. With 2.26 million followers, Sina Weibo Big V ” , Huang Sheng look sfinancial” on the straight words, “Tesla financing in the United States is also quite difficult, many financial institutions on Wall Street have been bombarded with Tesla is a fraud, is a Ponzi scheme, to China has become a super-national treatment of enterprises.” “
In fact, even before lending to China, Tesla was already saddled with significant overseas debt. Musk is understood to have been taking personal loans from Wall Street banks for years, backed by his 20 per cent stake in Tesla, which now owes $507 million to several Wall Street banks, which has led directly to Tesla’s access to U.S. financial institutions.
Goldman Sachs and Citigroup have previously given Tesla shares a “sell” rating. In August last year, The PIF, Saudi Arabia’s sovereign wealth fund, a potential investor in Tesla, also denied the idea of injecting capital into the company. Previously, the PIF had said it would open a $2 billion stake in Tesla, or about 3-5 per cent of the company.
Domestic difficult to let the old powder pay the bill
In addition to financial support, the city has provided Tesla with plenty of cheap land, even blocking PLANS to build a local company of NIO cars. At the same time, Tesla’s wholly-owned model in China has become the first foreign investment in China to build factories. While the chinese government has been considering liberalizing the 50:50 share ratio of the auto joint venture, so far only Brilliance BMW has increased its stake in the joint venture to 75 per cent after 15 years of the joint venture.
It is on the basis of these concessions that The Tesla Super plant has reduced its 1-2 year duration to eight months. This extraordinary development, musk can not help but sigh: “Shanghai speed is amazing!” “The first 15 domestic Tesla Model 3s were delivered to employees, again ahead of the first quarter of 2020, as predicted by the official website. In response, Tesla said, “Delivering the car earlier than expected is because the production process is smoother than expected.” “Looking back, it is precisely because of the market, capital, labor and other advantages in the Chinese market, as well as the U.S. market related disadvantages, so that Tesla such a seedling in the U.S. soil, it is expected to grow into a towering tree on Chinese soil. “There are people in the industry who are outspoken.
However, the home-made Model 3 does not allow a group of old car owners to pay the bill again. In a group of more than 300 Tesla owners in Beijing, a car owner is transferring a home-made Model 3 that could have been picked up years ago, in exchange for an imported version. Many car owners said, “will still choose to import models, but the difference between imported cars and domestic vehiclepurchase tax is very uncomfortable.” It can be seen that the home-made Tesla seems to have changed its taste in the eyes of the savvy. It is worth noting that Tesla, which enjoys various preferential policies in China, is raising prices in the form of replacement models. In October 2019, the domestic Tesla Model 3 Standard Battery Extension model has been officially opened for booking, starting at RMB355,800, but compared with the previous standard battery life version of 328,000 yuan, the upgraded standard life-extended Model 3 once increased by nearly 30,000 yuan. At the same time, Tesla’s sales system capacity in China is also questionable, Tesla car owners in the group of people broke the news that “sales staff in the introduction of the domestic Model 3, even the headlights compared to a copy of Porsche”, people laugh, not any professional.
Cowen, the US investment bank, said in a report that it did not expect Tesla to perform better in China, Bloomberg reported. As of Last October, China’s best-selling electric car, the BAIC EU series, sold less than 2,000 vehicles a week, according to the report, and the top five models, all of which are domestic brands, sold less than 6,000 vehicles a week. These models cost between a quarter and three-quarters less than the Chinese-made Model 3. “While Tesla has built a very loyal fan base and is willing to endure poor production quality, customer service and service infrastructure, we remain sceptical about the acceptance of the wider user base,” said Osborne, an analyst at Cowen, the US investment bank. “
Tesla’s shares rose to $422 at one point two weeks ago, surpassing Musk’s previously announced exit at $420 a share. Morgan Stanley, however, reiterated its target price of $250 a share for Tesla, saying that Tesla’s current share price was grossly overvalued for a carmaker that would eventually see Tesla as a technology company and cause its market value to plummet to levels comparable to that of other manufacturers in the traditional auto industry. So Tesla has faded its aura in the U.S. mainland. After the domestic Tesla with the decline in demand and follow-up after-sales, charging and a series of problems surfaced, the day in China is not a peace of mind. Is it time for Tesla, which has been born out of “supernational treatment”, to weane?