What are the contents of Tesla's betting agreement?
2 Answers
Tesla obtained a loan in China with an annual interest rate of 3.9%. When Tesla was building its factory in Shanghai, it signed a betting agreement with the Chinese government. The agreement stipulates that: starting from the end of 2023, the Shanghai Gigafactory must pay taxes annually. If this condition is not met, in addition to reclaiming the land used for the factory construction, Tesla must also invest RMB capital expenditures in the Shanghai factory over the next five years. Below is additional information on the meaning of a betting agreement: 1. A betting agreement is essentially a form of option. Through the design of its terms, a betting agreement can effectively protect the interests of investors. 2. In foreign investment banks' investments in domestic enterprises, betting agreements have already been applied. 3. A betting agreement is an agreement between the acquirer (including investors) and the transferor (including the financing party) regarding uncertain future situations when reaching a merger (or financing) agreement. 4. If the agreed conditions are met, the financing party can exercise a certain right; if the agreed conditions are not met, the investor can exercise a certain right. Therefore, a betting agreement is essentially a form of option.
I've been studying the automotive market for many years and understand that Tesla's bet agreement is a compensation plan approved by the board in 2018. The core content is that Musk gave up his fixed salary and relied entirely on the company's performance targets to unlock stock option rewards. Specifically, it is divided into several tiered goals: the market value must start from $100 billion, gradually reaching $200 billion, $500 billion, and finally $650 billion; revenue must grow significantly, targeting around $100 billion to $200 billion; profits must also meet expected standards. For each milestone achieved, Musk receives a batch of stock rewards, and if all are completed, the total value amounts to billions of dollars. This agreement ties personal returns to corporate success, motivating Musk to drive production innovation, such as accelerating the development of the Model 3 and Cybertruck. As a car enthusiast, I think this design is ingenious—high risk but with tempting rewards, significantly enhancing Tesla's global influence.
