Tesla Can Tap Into $300 Million from Deutsche Bank for Leasing Program

Tesla Motors can now borrow up to $300 million from Deutsche Bank for its vehicle leasing program, and to stabilize its financial condition.

In a filing the U.S. Securities and Exchange Commission, Tesla said that cutting down its own cash requirements for its direct leasing program would be “significantly reduced.” That means Tesla will need to raise fewer funds from the public market to grow its leasing program, the electric carmaker said.

Restoring liquidity will be important for Tesla to launch the Model 3 next year, as leasing has always played a big part of Tesla’s electric car sales. That will be getting tougher following a year with over $600 million of cash spent in the first half of the year, the SolarCity acquisition, and gearing up battery and car production for the Model 3 launch.

The amount outstanding from the loan and security agreement with Deutsche Bank will be due on Sept 20, 2018.

Tesla reported in August that it had $3.25 billion in principal sources of liquidity as of June 30, 2016. That took a hit in July when the company repaid $678 million on a revolving credit line. Tesla has also planned to redeem $411 million of 2018 convertible notes. The company said that it could be spending more money on securities.

SEE ALSO:  Tesla Cuts Model S Lease Price; Initiates 90-Day ‘Happiness Guaranty’

Tesla has been able to find banks to back its direct leasing program, which differs from other makers and their captive finance arm leasing programs. In 2013, Tesla entered a partnership with Wells Fargo and US Bank for a guaranteed “buy back” program. Tesla lessors are given lease return where Tesla offers to buy back the Model S or Model X between 36 and 39 months with a guaranteed residual value.

Leasing a Model 3 will likely play a big part in Tesla’s mission to sell 500,000 new vehicles per year by 2020.

Reuters