Elon Musk confirms Tesla’s $ 1.4 billion loan to Giga Shanghai prepaid
Tesla CEO Elon Musk confirmed on Twitter several days ago that the company’s $ 1.4 billion loan for its Gigafactory plant in Shanghai, China has been repaid.
October 4, 2021, @ jpr007, a Tesla enthusiast on Twitter, showed documents indicating that Tesla had officially paid off its entire $ 1.4 billion loan, granted by Chinese banks, in just sixteen months. The loan was announced in December 2019 and did not appear to have a balance in Tesla’s financial documentation for Q2 2021. Musk then confirmed the story by stating, “Tesla is still paying its debts.” His statement was a response to a CleanTechnica article.
Tesla still pays his debts
– Elon Musk (@elonmusk) October 5, 2021
JPR said the $ 1.4 billion loan was repaid in just 16 months because the terms of the loan had a repayment period of five years, or sixty months. This would imply that Tesla massively repaid the huge loan, and it appears that the entire balance was paid with profits from the Shanghai factory. The loan was granted by several banks, including the China Construction Bank, the Agricultural Bank of China, the Industrial and Commercial Bank of China and the Shanghai Pudong Development Bank, according to a report by Reuters.
Tesla has a reputation for paying off its federal loans, whether from the US government or a foreign entity, fairly quickly and well ahead of schedule. In May 2013, Tesla, then Tesla Motors, announced that it had repaid a massive loan from the US Department of Energy, sending its last transfer on May 22 worth $ 451.8 million. Tesla repaid the loan nine years earlier.
If the speculation is correct and Tesla only used the profits from the Shanghai plant to repay the Chinese banks’ $ 1.4 billion loan, this was likely fueled by the widening gross margins that Tesla received from its vehicle sales. Tesla has become a mainstay of the Chinese electric vehicle market, being one of the region’s leading manufacturers in terms of sales figures. Additionally, the company was rumored to have a gross margin of 39% on its China-built Model 3 and 29.4% on the Y-model. The increase in gross margin came from vertical integration and increased manufacturing efficiency which made Tesla vehicles easier and more affordable to produce.
Paying off loans early is a great idea for the electric automaker, as Tesla uses strategic financial strategies to eliminate debt while increasing profitability. Tesla has already racked up eight consecutive quarters of profitability, dating back to the third quarter of 2019.
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