Tesla Scores Landmark Deal For Chinese Factory

Tesla has secured a loan of $1.29 billion from a group of four Chinese lenders that it will use for its car factory in Shanghai, Reuters reports, citing a regulatory filing.

The filing comes as Tesla scored another win on the Chinese market: the Model 3 that is manufactured in the country was ruled eligible for exemption from a 10-percent sales tax by the Chinese authorities, according to a Bloomberg report.

The move is bound to push local sales higher, especially as it comes after another piece of good news for the EV maker: earlier this month, the Chinese Ministry of Industry added the locally made Model 3 to its list of subsidy-eligible EVs. This means the Chinese-made Model has been given the greenlight to be sold on the Chinese market, Tesla said in a tweet quoted by Electrive.com.

Tesla’s foray into China is a foray into the world’s largest electric vehicle market amid a trade war between the United States and China that has already hurt sales of imported cars with the extended exchange of tariffs between the two. The Shanghai Tesla factory is the solution to this and other similar trade risks in the future, which makes it the cornerstone of Tesla’s strategy for international expansion.

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The news about Tesla’s new loan prompted an analyst to raise his price target for the company to $370 from $100 yesterday, right after the stock closed at almost $431, breaking its previous record.

“Both U.S. consumer demand for Model 3 and most importantly European strength should likely drive upside this quarter and enable Tesla to comfortably hit its vehicle delivery guidance of 360K–400K units for [the 2019 fiscal year], which represents an increase of 45% to 65% year-over-year,” Daniel Ives from Wedbush wrote in a note Thursday, as quoted by MarketWatch.

“While part of this recent rally has been a massive short covering, it has also been driven by underlying fundamental improvement as the company’s ability to impressively not just talk the talk but walk the walk has been noticed by the Street and the optimism around the story has growth markedly from the dark days seen earlier this year.”

By Irina Slav for Oilprice.com

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