Musk breaks ground in China for first Tesla factory outside US

09 January, 2019, 14:38 | Author: Brooke Harris
  • Matthew DeBord  Business Insider

Tesla's Chinese factory broke ground on Monday afternoon (Jan 7) in Shanghai where it will begin making Model 3 electric vehicles (EV) by year-end.

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

The $5 billion investment comes at a tenuous time in relations between the US and China.

According to a report in teslarati.com, by producing its lower-end Model 3 and Model Y in Shanghai, Tesla would be able to price the vehicles very competitively in the country - regardless of the presence of a trade war between the USA and China.

"The high-end versions of the Model 3 - the price will still remain the same next year", Musk said Monday in an interview with Kanka News, an online news portal for government-run Shanghai Media Group.

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".

China is the world's largest auto and NEV market, with Beijing aspiring to become the global NEV leader with technologies that meet the highest worldwide standards by 2025.

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A local Chinese plant could be crucial for Tesla, which is facing a drop in demand in the US, its biggest market, after reductions in federal tax credits for electric vehicles.

Tesla was the first foreign auto maker to take advantage of a recent rule change allowing foreigners to own their China business, instead of having to work with Chinese partners as previously required.

"Affordable cars must be made on same continent as customers", Musk wrote in another Twitter post. It will help Tesla to mitigate the effects of the ongoing US-China trade war by eliminating the impact of rising export costs.

Model 3, for example, which starts at a price of Dollars 35,000 in the United States market, is sold between 500,000 yuan and 560,000 yuan (around USD 72,980 and USD 81,738) in China. The country's slowing economy and its trade war with the United States have severely impacted the auto industry.

Tesla has opened a tender process to build a $2 billion plant in Shanghai - dubbed a Gigafactory - and at least one contractor has started buying materials, Reuters reported earlier last month.

The electric automaker purchased the site past year for roughly $140,000 and intends on building the 860,000-square-meter site far quicker than is typical of automotive factories, Forbes reports.

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.

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