Elon Musk breaks ground on first Tesla factory outside US

Andrew Cummings
January 8, 2019

The US$2 billion factory - long under discussion - marks a major bet by the US electric vehicle maker as it looks to bolster its presence in the world's biggest auto market, where it faces rising competition from a swathe of domestic rivals and its sales have been hit by increased tariffs on US imports.

Tesla purchased the land for the Shanghai factory just outside the city for approximately $140 million in October.

Tesla's next model, the Model Y small SUV, was originally slated to go into production in 2019, but the company now has no factory space to produce it.

Analysts say production in China would allow Tesla to side-step such measures, which have already caused a spike in the price of the cars the company now imports to the Chinese market.

The so-called Gigafactory is China's first wholly foreign-owned auto plant, a reflection of China's broader shift to open up its vehicle market, even amid a trade war with the United States which has seen a rise in tariffs on cars imported from the U.S.

The Shanghai plant would supply the "Greater China region" with "affordable versions" of the Tesla Model 3 - the carmaker's first mid-price, mass-market vehicle - and its planned Model Y, Musk tweeted.

Model 3, for example, which starts at a price of Dollars 35,000 in the U.S. market, is sold between 500,000 yuan and 560,000 yuan (around USD 72,980 and USD 81,738) in China.

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.

Tesla unveiled its first Gigafactory in 2016, which was initially a "tent" production facility in the Nevada desert.

In a sign that Tesla is preparing to start construction of its first factory in China, Musk said last week that he would be visiting China soon for the groundbreaking ceremony.

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.

Shares in Chinese suppliers to Tesla, including Tianjin Motor Dies and VT Industrial Technology, rallied on Monday after Musk's comments.

Tesla has broken ground at Gigafactory 3 in Shanghai, China during a ceremony attended by chief executive Elon Musk. As a matter of fact, Musk revealed on Twitter that the first stage of production at the site should be completed by the second half of 2019.

Other electric vehicle manufacturers in China include BYD Auto, BAIC Group, and government-owned Shanghai Automotive Industries Corp.

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