What happened

Shares of Chinese electric-vehicle maker Xpeng (NYSE:XPEV) were trading higher on Tuesday, after the company said that it has secured a new $2 billion credit line to help it expand manufacturing and sales.

As of 1:45 p.m. EST, Xpeng's American depositary shares were up about 16.1% from Monday's closing price.

So what

Xpeng said on Tuesday morning that it has secured a new credit line of 12.8 billion yuan (about $2 billion) from five Chinese banks. The company said that it plans to use the credit line to support the "expansion of its manufacturing, sales, and service capabilities."

Xpeng, which opened its first factory last June, broke ground on a second plant in Guangzhou in November. The company began building its P7 sedan in that first factory last year; its first model, the G3 SUV, has been built under contract in a plant owned by established automaker Haima since 2019. Xpeng plans to add a third model, another sedan, by the end of 2021.

Car transporters loaded with Xpeng P7 sedans outside a factory.

Xpeng is expanding quickly. The company opened its first factory last June and is already building a second. Image source: Xpeng.

In a statement, CEO He Xiaopeng said that the deal helps to diversify Xpeng's funding channels. The company raised $1.7 billion in its August 2020 initial public offering and $2.5 billion more in a secondary stock offering in December. 

Now what

For auto investors, this move obviously bolsters Xpeng's balance sheet in a way that doesn't dilute existing shareholders and doesn't necessarily incur high costs. We'll learn more about Xpeng's plans for the new credit line when it reports its fourth-quarter and full-year 2020 results next month. 

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