Tesla’s financing arrangements in China may be the subject of the US Securities and Exchange Commission (SEC) inquiry that the electric car maker disclosed last week, according to analysts at Evercore ISI. The financing Tesla lined up from local banks last year may have allowed the carmaker to delay recognition of capital expenditures, said Chris McNally, an analyst at the New York-based investment banking advisory firm, in a report. He rates Tesla shares the equivalent of a sell. The arrangements, according to the Evercore report, also probably help explain how Tesla spent just US$1.3 billion on capital expenditures last year, a little more than half its budget for as much as US$2.5 billion. “It’s possible that TSLA’s Shanghai factory and extremely limited capex may be what the SEC is looking into,” McNally wrote. Representatives for Tesla did not immediately respond to requests for comment, and Judy Burns, an SEC spokeswoman, declined to comment. Tesla disclosed in a regulatory filing last week that the SEC sent the company a subpoena on December 4 seeking information on “certain financial data and contracts including Tesla’s regular financing arrangements”. In the same filing, the company said that much of the investment in its factory near Shanghai “has been and is expected to continue to be provided through local debt financing”. Tesla disclosed in December that it had lined up 11.25 billion yuan (US$1.6 billion) in financing from local banks for the plant, which started producing the company’s Model 3 electric cars late last year. “We are supplementing such financing with limited direct capital expenditures by us, at a lower cost per unit of production capacity than that of Model 3 production at the Fremont factory,” Tesla said last week in its 10-K, referring to its higher-cost assembly plant in California. Tesla said to be in talks to use CATL’s cobalt-free batteries in China-made cars After two straight quarterly profits, several analysts who have remained sceptical of Tesla’s earnings power have said the company will have to increase expenditures to follow through on chief executive Elon Musk’s plans for new products and additional factories. Tesla plans to roll out the new Model Y crossover this quarter, start production of its Semi model this year and open a new plant near Berlin next year. It also has Cybertruck and Roadster models in development. Purchase the China AI Report 2020 brought to you by SCMP Research and enjoy a 20% discount (original price US$400). This 60-page all new intelligence report gives you first-hand insights and analysis into the latest industry developments and intelligence about China AI. Get exclusive access to our webinars for continuous learning, and interact with China AI executives in live Q&A. Offer valid until 31 March 2020.