Tesla plans China plant with 500000 vehicle capacity

Jul 11, 2018, 02:22
Tesla plans China plant with 500000 vehicle capacity

Avoiding tariffs would deliver a significant boost for Tesla, as just last week the country's government raised the import duty on USA -made vehicles to 40 percent. Tesla cars are displayed at a showroom in the Meatpacking district in Manhattan on June 6, 2018 in New York City. "Today, we have signed a Cooperative Agreement for Tesla to start building Gigafactory 3, a new electric vehicle manufacturing facility in Shanghai".

A city government statement said the factory would be the biggest foreign investment to date in Shanghai, which is also a base for joint ventures between General Motors Co. and Volkswagen AG and a state-owned automaker. China has long pushed to capture more of the talent and capital invested by global automakers in advanced electric vehicle technology.

Tesla's Chief Executive Elon Musk attended the signing, according to a Reuters witness.

In a first for a foreign automaker, Tesla was allowed to open the factory without partnering with a Chinese company. Musk, 47, said more than two years ago that he expected Tesla to produce more than 500,000 vehicles in 2018 at its lone car-assembly plant in Fremont, California, but the company is well off that pace because of the Model 3's slow start.

Tesla shares rose 1.5 percent in early US trading, even as some analysts questioned where the money-losing company will get the capital required to build and staff such a large plant.

Its basic Model S sedan in China now costs about 849,900 yuan ($128,779), versus 710,579 yuan in May, while a Model X sport-utility vehicle costs about 927,200 yuan, versus 775,579 yuan, according to Tesla's website.

In what is Tesla's biggest step yet into an overseas market, the electric carmaker on Tuesday inked a deal to begin construction of a manufacturing plant in China capable of producing 500,000 cars a year. That was more than double the USA level of just under 200,000.

The agreed-upon factory could be Tesla's other attempt at breaking into the world's largest electric vehicle market. After China announced in May that it planned to scrap by 2022 the rules on capping foreign ownership of new-energy vehicle ventures, Tesla registered a new electric auto firm in Shanghai.

Tesla hiked prices in China over the weekend to a level more than 70 percent higher than in the United States amid mounting trade frictions between Washington and Beijing that have seen several US imports, including cars, subjected to retaliatory tariffs of 25 percent.

The company has boosted of Model S sedans and Model X crossovers in China by as much as $30,000 after Beijing imposed additional duties on American-built autos, putting its vehicles beyond the reach of more consumers in its No. 2 market globally.

The youngest publicly held US automaker is looking to expand its capacity and to more efficiently reach global markets.

BMW also announced plans to increase production in China, but it said that was because of increased demand for vehicles there. That gave it about 3 per cent of the nation's battery-powered electric-vehicle market, placing it as the No. 10 brand in that segment.