Tesla To Build Gigafactory In China


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Tesla to build Gigafactory in China

Elon Musk has signed a preliminary agreement with the Shanghai government to build a Tesla factory in China. According to reports, the upcoming China factory will be capable of manufacturing 500,000 vehicles per year, rivaling the output of Tesla’s main electric car plant in Fremont, CA.

I’ve done recently a story on Tesla looking to build Gigafactory in Germany, but here Tesla has gotten permission and agreement with the local government for location of new Gigafactory that could produce up to 500 000 tesla cars by 2025.

The Report of Musk’s trip to China emerged yesterday after people familiar with the proceedings revealed that the Tesla CEO will be at an “event” in Shanghai on Tuesday, followed by a visit to Beijing sometime on Wednesday or Thursday. Few other details were provided about Musk’s trip to China, though pictures emerged on social media on Tuesday revealing that the Tesla CEO briefly stopped over in Thailand to drop off the minisub he and SpaceX engineers designed to help rescue the remaining 5 members of the stranded soccer team in the Tham Luang Nang Non cave complex.

China is becoming increasingly important market for electric cars, where one in 3 electric cars are sold worldwide. However, Tesla’s China Gigafactory could also circumvent ongoing trade war with the United States, China has opted to place steep tariffs on vehicles imported from US in response to Trump’s trade tariffs. With the new taxes in place, Tesla was forced to raise the prices of its Model S luxury sedan and its Model X SUV by 150,000 yuan ($22,647) to 250,000 yuan ($37,744).With its own facility in the country, Tesla would be able to bypass China’s steep tariffs regardless of the presence of a trade war.

Musk hopes to match local electric car manufacturers such as BYD and Leeco. Tesla Gigafactory in China would likely be tasked with the production of the Model Y crossover SUV, and Model 3 relatively affordable sedan.

Tesla was able to capitalize on China’s adjustments to its ownership laws that were implemented earlier this year. Prior to the US and China’s ongoing trade dispute, the Asian economic superpower removed ownership restrictions for facilities owned by foreign companies. This opened the way for Tesla to get an approval for a solely-owned facility in the country.

China’s population is becoming increasingly wealthier, and now estimated population that can be classed as middle class has surpassed 400 million mark, with income of between $10 000 and $40 000 per year this segment of Chinese society is expanding rapidly and by 2025 it might double. Tesla’s position in the market will be crucial for future of Tesla, and success in the world’s largest market for electric cars will likely be dependent on how the company positions itself against its Chinese competitors and price Tesla offers to Chinese market.

Tesla’s China gambit might prove one of its best decisions yet, for China is growing rapidly and will surpass US in nominal income by 2030, with 1billion Chinese attaining middleclass status by 2028. Musk’s hope of Tesla $650 billion market cap valuation by 2029 that could pave the way for Mars colonization is coming along nicely.
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