Tesla to break ground on Shanghai 'Gigafactory'

Daniel Fowler
January 8, 2019

The factory, now just an expanse of muddy fields about two hours from Shanghai, will produce affordable versions of Tesla's Model 3 and Model Y for Greater China, he said during the visit, which took place on a cold, rainy day.

Tesla's US-made cars are now subject to a 15 per cent tariff in the mainland after Beijing rolled back an extra 25 per cent tariff it slapped on USA auto imports for three months from January 1.

The so-called Gigafactory would also be China's first wholly foreign-owned vehicle plant, a reflection of China's broader shift to open up its auto market even amid the whipsawing trade war.

"With the construction of the Shanghai factory, the faster the better [for Tesla]".

Tesla has yet to give a price tag but the Shanghai government said it would be the biggest foreign investment there to date.

Tesla's factory in China - the world's biggest vehicle market - will be its first outside the US.

Gigafactory 3 was expected to produce around 3,000 Model 3 vehicles a week in the initial phase, ramping up to 500,000 vehicles per year when it became fully operational, Tesla said in a statement.

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Tesla (TSLA) has broken ground on a Shanghai, China, factory - the first plant outside the USA for the electric auto manufacturer.

CEO Elon Musk said Monday on Twitter that the company will start production in China of its Model 3 and a planned crossover by the end of the year.

China and the U.S. have been in a trade war for much of 2018 that has seen the flow of hundreds of billions of dollars worth of goods between the world's two largest economies disrupted by tariffs.

The factory is expected to double Tesla's electric vehicle production, beginning in two years. China remains the world's largest market for vehicles, particularly green ones. A key China PMI index fell below 50 in December to its lowest reading since May 2017, signaling weakening demand in the $12.2 trillion economy. Chief Executive Officer Elon Musk called on Chinese consumers to order their Model 3 now in an interview with a Shanghai media outlet, warning that a new local plant isn't going to make top-end versions of the sedan any cheaper.

Construction begins just three months after Tesla secured a land parcel at Lingang, Shanghai for the Gigafactory 3, its first plant outside the United States.

Till now, foreign automakers in China were required to forge joint ventures with domestic firms for establishing manufacturing plants, which means sharing profits and technology with local partners. He provided no price figures for China-made cars.

Alan Kang, Shanghai-based analyst for consultancy LMC Automotive: "Tesla's sales [in China] have dropped over the past few months because of high prices caused by the tariffs".

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