Tesla to break ground on Shanghai 'Gigafactory'

Irving Hamilton
January 8, 2019

But the timing couldn't be more inauspicious.

Gigafactory 3 will be China's first wholly foreign-owned auto plant and should allow Tesla to minimise the impact of the trade war which has seen Beijing impose big tariffs on U.S. vehicle imports.

Trade war aside, the carmaker is building the plant in an auto market that likely contracted a year ago for the first time in decades.

He also said plans for the factory include finishing "initial construction this summer", starting "Model 3 production end of year", and reaching "high volume production next year".

The Shanghai factory will produce "affordable versions of 3/Y for greater China", Musk said.

The Model S, Model X and "higher cost versions" of the 3 and Y would continue to be made in the United States for the global market, including China, he added. The U.S. Securities and Exchange Commission moved to punish Tesla past year after his infamous "funding secured" tweet, with fines and a settlement that required corporate governance reforms. Meanwhile, electric models from Nissan began rolling off a production line in China in August.

Until now, foreign automakers that wanted to manufacture in China were required to work through state-owned partners.

"Affordable cars must be made on same continent as customers", Musk tweeted on Monday.

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Musk has also said the company needs the Chinese factory, outside Shanghai, to reduce tariffs that China imposed on imported cars in retaliation for President Trump's tariffs on Chinese steel.

The push into China comes amid simmering trade tensions between Beijing and Washington.

Producing cars in China should help Tesla fend off competition from domestic electric vehicle brands. In November, they clocked 393.

Tesla cut prices for its Model 3 last month, the third time in the last two months for the firm to adjust prices in China.

Passenger vehicle sales in the world's second-largest economy declined for six consecutive months through November, putting them on track for the annual decline.

But the pace of growth is expected to slow along with China's economy.

Tesla signed a preliminary agreement with the Shanghai government past year to build the 500,000-unit factory in the Chinese city. In October, the company got the approval to use an 864,885 sq mt tract of land in Lingang for its Shanghai plant.

The Shanghai factory is being billed as a Gigafactory that "will allow Tesla to localize production of Model 3 and future models sold in China, with plans to eventually produce approximately 3,000 Model 3 vehicles per week in the initial phase and to ramp up to 500,000 vehicles per year when fully operational (subject to local factors including regulatory approval and supply chain constraints)".

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