On December 14, Tesla sold 837 million US dollars of car leasing bonds, taking advantage of investors' confidence in the company to rebound, providing further funding for the fast-growing leasing business.
Tesla CEO Musk revealed in June this year that the company is likely to launch Model 3 (parameter | inquiry) leasing service next year, and also catch up with the current popular electric car leasing service trend. However, the plan requires Tesla to advance funds and have a negative impact on the company's cash flow. In order to reduce this negative impact and realize the project of leasing a car, Tesla converted the idea and planned to use the cheaper Model 3 to provide car leasing services.
Musk said in the tweet: "The leasing service will have a negative impact on Tesla cash flow, so we may not offer Model 3 leasing services within 6 to 9 months. Loan financing is a better form of transaction. Although the bank will make a conservative estimate of the residual value of the new model, Tesla's products have always had good residual value. The company will launch the Model 3 leasing plan in early 2019. It will exceed the weekly production of 5,000 in Tesla. After the goal is realized, it will be implemented."
In February of this year, Tesla issued the first batch of car leasing bonds, raising $546 million, slightly more than the yield of similar bonds from established car companies. Like the deal, the company's latest bonds are specifically guaranteed for its Model X and Model S leasing businesses, which are typically priced at around $100,000.
The sale of car leasing bonds is a common tool used by car manufacturers to finance their leasing business. Manufacturers sometimes get credit lines from banks to ensure that they receive cash when they are waiting to recover money from a leasing car. They issue car leasing bonds to pay for these credit lines.
Over the years, Tesla has steadily increased its credit line for its car leasing business to $1.1 billion, while its annual leasing income has increased from $133 million in 2014 to more than $1 billion last year. As of September 30th this year, the company extracted nearly $660 million from the line of credit, up from about $500 million three months ago.