Market Overview

Is Tesla Opening Its Own Bank?

Is Tesla Opening Its Own Bank?

Elon Musk's tweets, specifically those concerning Tesla Motors Inc (NASDAQ: TSLA)'s new product launches/updates, usually set tongues wagging. A recent tweet from the founder of the company regarding an October 17 timeline for a product unveiling, which he qualified as "unexpected by most," has created quite a stir in the markets.


Conjectures ranging from the Model Y prototype to a hefty Autopilot update to radically revamped battery packs to even a bank are doing the rounds.

An article appearing in the Tech Times on Thursday explored the possibility, feasibility and viability of Tesla foraying into the banking industry.

Related Link: What Autopilot 2.0 Means For Mobileye

Tesla, which has thus far shunned captive lending, might be considering the option as its vehicles are priced high, putting these out of the reach of normal car buyers.

Captive lending is a practice adopted by car dealers who arrange loans for buyers and make a neat profit out of the differentials between the interest rate paid for securing loans and received for extending the loan. With the company ramping up production and pre-orders surging, it only makes sense that it wouldn't want to lose out on the interest rate spread.

The Tech Times article also indicated that Tesla would want to remain fiercely independent, given the fact that it had reached a funding limit with one of its partners earlier this year.

The article added it is in Tesla's self-interest that the company controls the process from end-to-end, rather than allowing buyers come in armed with financial support from an external agency.

Last but not the least, the article highlighted Musk's experience in the financial world, he being one of the founding members of Paypal Holdings Inc (NASDAQ: PYPL), as one of the reasons why Tesla would consider setting up a banking arm.

At the time of writing, shares of Tesla were down 0.45 percent at $200.60.

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