A new 10 billion yuan ($1.4 billion), five-year loan facility will be given to the united States based electric car maker Tesla by a group of China banks as funds for developing the car maker’s Shanghai car plant, reported the news agency Reuters citing information from three sources familiar with the matter. The report, a portion of the loan will be used by Tesla to roll over an existing loan.

The Chinese banks that which have agreed to give Tesla the financial support include China Construction Bank (CCB), Agricultural Bank of China (AgBank), Industrial and Commercial Bank of China (ICBC) and Shanghai Pudong Development Bank (SPDB) among others, claimed the Reuters report citing a source with direct knowledge of the matter.

A 12-month facility of up to 3.5 billion yuan had already been offered earlier this year by the Chinese banks to Tesla. And according to a filing the automaker made to the U.S. Securities and Exchange Commission, the electric car maker is due to repay the amount on March 4, 2020.

The report quoted one of the three sources cited as saying that the previous 3.5 billion yuan debt will be rolled over by a part of the new loan. The residual portion of the loan will be used up by the company for development of its Chinese factory in Shanghai and to fund its operations in China.

The report also claimed that the rate of interest for the new loan to be given to Tesla has been set at 90 per cent of the one-year benchmark interest rate of China which is the same rate of interest as was put on the 3.5 billion yuan loan. This rate of interest is typically offered to their best clients China banks,

There were no comments available in the report from Tesla, CCB, AgBank, ICBC and SPDB.

Work on the Shanghai factory was started by Tesla in January this year and the company has already started manufacturing electric cars at the plant. The aim of the company is to achieve a production capacity of churning out at least 1,000 Model 3 cars a week till the end of the current year.

The Shanghai facility is the first production unit of Tesla outside of the United States and is at the core of the company’s plans and ambitions for the Chinese market as the company looks to make it big in the largest auto market of the world. Additionally, the China factory will also help the company to bypass the import tariffs by China on American products as a part of its trade war with the US.

The Tesla project also has the support and backing of the Shanghai government. The Shanghai project is also the first wholly foreign-owned car plant in China and is an example of the Chinese government’s intention of opening up its auto market to foreign companies,

(Adapted from Reuters.com)