Fri, Dec 07, 2018 - Page 10 News List

Tesla to launch huge Shanghai plant next year

Bloomberg

A government announcement of a land request is seen on a fence on land secured by Tesla Inc for its “gigafactory” in Shanghai, China, on Nov. 11.

Photo: Reuters

Tesla Inc plans to start production in China in the second half of next year as the US electric-car maker advances its push in the world’s largest auto market, the city of Shanghai said.

Shanghai Mayor Ying Yong (應勇), visited the project site in the Lingang development zone and encouraged Tesla to accelerate construction, a statement on the city’s WeChat (微信) social media account said yesterday.

The plant, dubbed Gigafactory 3, is to be the biggest-ever foreign-invested manufacturing project in Shanghai.

A Tesla representative did not have an immediate comment.

The Palo Alto, California-based company has secured more than 80 hectares of land for the factory, which is expected to cost several billion US dollars to build.

Tesla’s first overseas plant is to help the electric-car maker avoid some of the risks involved with importing vehicles, such as higher tariffs caused by the trade tensions between China and the US.

While China is Tesla’s biggest market after the US, volumes in the country have been limited, because the company has had to rely on imports.

The 40 percent duty that China levies on cars brought from the US has had an effect on sales, the company said when reporting third-quarter earnings in October.

The tariff has left Tesla’s models at a pricing disadvantage against local electric-car rivals, such as BYD Co (比亞迪), while new Chinese entrants, including NIO Inc (蔚來汽車) and Xpeng Motors (小鵬汽車), are also racing to win over customers before Tesla starts its full-scale push in the country.

At the same time, the Chinese car market is headed for its first drop in at least two decades as economic headwinds, the trade war with the US and slumping stock prices weigh on consumers’ appetite to buy new vehicles.

New-energy vehicles — which include battery-powered, plug-in hybrid and fuel-cell automobiles — are bucking the trend.

Sales of these models reached 777,000 units last year and could surpass 1 million this year, according to the China Association of Automobile Manufacturers.

The government’s target is 7 million vehicles a year by 2025.

Tesla chief executive Elon Musk in October said that Tesla was striving to start production of its Model 3 vehicle in China next year.

The company has also started to advertise for employees for the new facility.

Shanghai authorities are helping Tesla obtain loans from some of the biggest Chinese banks to fund the new plant, people familiar with the matter said in August.

Tesla could borrow about US$1.3 billion locally for the facility, RBC Capital Markets analyst Joe Spak said last month.

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