Tesla Hopes To Finalize China Factory Location By Mid-2016

1 year ago by Mark Kane 19

Tesla Model S Visits The Great Wall

Tesla Model S Visits The Great Wall

Tesla Model S Supercharging In China

Tesla Model S Supercharging In China

Elon Musk said recently that Tesla Motors is searching for a local partner and location for a factory in China.

Establishing a joint ventrue to assemble the cars in China is seen as a way to avoid high import duties, as well as to catch onto incentives available only for Chinese EVs manufacturers.  With the restrictions in place today, there is currently no business model that supports volume sales for automobiles imported into China.

Apparently are just months away from the announcement of a joint venture partner because Tesla is in a hurry according to an interview by CEO Elon Musk to Engadget:

“… he  (Musk) aims to lock down manufacturing plans — finding a local partner and a location for the plant — for the local market by middle of this year. As with most other foreign auto makers who do business in China, this key strategy is to waive the high import duties charged by the local government, as well as to access other local incentives for EVs. Until then, Musk said there’s no further news to share on that end.”

Tesla CEO said the automaker is “doing reasonably well” in China, but the 2016 sales target was set at only 5,000 cars illustrates that without regional production there is certainly a theoretical cap in place.

Elon Musk Presented This Slide On China At A Live Event We Attended This Week In Hong Kong (InsideEVs/Alex Wai)

Elon Musk Presented This Slide On China At A Live Event We Attended This Week In Hong Kong (InsideEVs/Alex Wai)

The question now would be the scale of manufacturing facilities in China, as Tesla already has a full plate with the building of its Gigafactory in Nevada, as well as bringing the company’s first high volume affordable EV to market.

We would expect that (at least in the beginning), China operations would have a blend between some location production of parts and how things operate currently at Tesla’s European Tilburg Factory, which simply assembles the cars from parts shipped from California.

Tesla Model X deliveries in Hong Kong are to begin by the end of 2016.

Here are some new stats report by the CEO from Hong Kong this week (check out our live recap of the event here):

  • over 340 Superchargers stands (96 stations according to the supercharge.info)
  • over 1,600 destination chargers
  • 15 stores in 7 major cities
  • Macau store opening soon

Source: Engadget

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19 responses to "Tesla Hopes To Finalize China Factory Location By Mid-2016"

  1. ffbj says:

    I think that a similar model to Tilburg is correct, but the question is would that placate the Chinese? I mean by their law, does that qualify a vehicle not to be subject to import taxes.
    The good thing for Tesla is that the Chinese really want to get Tesla to open manufacturing in China, for many reasons.

    One is it will be easier to steal technology, but also at least can show they are attempting to ameliorate some of the air pollution issues, which are epic.
    Also simply jobs, which they are in dire need of with their own economy faltering.

    A Faustian bargain.

    1. sven says:

      ffbi said:
      “The good thing for Tesla is that the Chinese really want to get Tesla to open manufacturing in China, for many reasons.”

      No they don’t. From the Forbes article that I linked to in my comment below:

      “The Chinese government does not want foreign EV brands to be produced in-country. EV JVs are possible, but by government edict, brands and technology of EVs must be owned by the joint venture, and no longer by a foreign license holder. That’s why Nissan had to launch its Leaf in China as the Venucia e30, to very limited success. GM, egged-on by Michigan lawmakers, insisted on making the Chevy Volt as a Chevy Volt in China, only to run into a Chinese wall.”

      “If current rules are applied, production of a Tesla-branded EV in China will not be allowed, and the car’s strongest suit, the Tesla brand, will go to waste. Unless the rules change, the only way to make a Tesla EV in China is to sell Tesla Motors TSLA to the Chinese.”

      http://www.forbes.com/sites/bertelschmitt/2016/01/26/no-there-wont-be-a-made-in-china-tesla-car-anytime-soon/2/#27c1c6e91dad

      1. ffbj says:

        Yeah there is probably something to what Forbes has to say, but I don’t take it as gospel.
        I as much suspected the last part of your comment, but rules change and the Chinese leadership can turn on a dime. The once ascending are now descending.
        Too soon to much more than speculate on what the outcome will be, but in all likelihood it will not favorable to Tesla which is why I called it a Faustian bargain, but that was probably asking a little too much as a literary reference for most to get.

        1. sven says:

          But it’s not just knowledge (technology) that the Chinese seek. The Chinese want Chinese brands to dominate their domestic auto market, and also want to use their joint-ventures with U.S. automakers as a Trojan Horse for Chinese-made cars to enter the U.S. market.

          This recent article vividly describes the Faustian bargain GM made with SAIC, its Chinese joint-venture partner, and China’s domestic and global automotive industry strategy:

          http://qz.com/594984/the-secret-history-of-gms-chinese-bailout/

          “Because the US auto task force refused to let GM spend TARP aid on its foreign operations, GM was forced to turn to SAIC for help. The resulting deal would forever alter the delicate balance of power in the Shanghai GM joint venture and drive GM to restructure its entire global strategy around its partnership with SAIC.”

          “By mid-November 2009, GM suddenly had $491 million to spend on GMDAT’s turnaround, but it wasn’t immediately clear where the money had come from. That December, the first details emerged: GM had sold 1% of Shanghai GM to SAIC, giving the Chinese partner a controlling stake in the venture. . . . At the time, GM executives said the deal would also allow SAIC to consolidate earnings from the joint venture and that in exchange it had helped GM ‘achieve some funding for other activities from the Chinese banking sector, which would have been difficult to do on our own.’ In its 2010 year-end SEC filing, GM eventually clarified that SAIC had helped it secure a $400 million commercial bank loan, with its stake in Shanghai-GM as collateral.”

          “China’s joint-venture auto industry strategy had easily-identifiable goals:”

          “Step 1: Form joint ventures with leading global carmakers.”

          “Step 2: Absorb the foreign partner’s technologies related to car design, engineering, and manufacturing.

          Step 3: Build cars under China’s own brand name.

          “Nearly one out of every four GM cars sold in China is now a Baojun, but as just 44% partner in Shanghai-GM-Wuling GM’s share of the profits is even thinner than at Shanghai GM.”

          Also, China through its bailout and joint venture with GM, is using GM as a Trojan horse to enter the U.S. market and sell Chinese made cars. Not only will GM be importing the Cadillac CT6 PHEV from China into the U.S., but will also be importing the ICE Buick Envision CUV.

          “Anyone who believed that GM’s bailout would create a bulwark against a long-feared flood of Chinese cars might be puzzled to find the very same automaker championing Chinese imports. In fact, this move is just the latest in a pattern that dates back to 2009, when GM received a secretive Chinese ‘bailout’ that appears to have turned America’s largest automaker into a Trojan horse for its Chinese partner.”

          1. drpawansharma says:

            In America rights of a (large) shareholder takes precedence over rights of a citizen. So this is not surprising at all.

          2. ffbj says:

            Right I read a story on that, and if you read my general comments on China, you will see how I have been accused of being a China basher, and I am.
            Though I still think Tesla will go into China,
            but they will get screwed like almost everyone else, foreign companies, that go’s in there eventually does.

  2. sven says:

    Engadget’s fluff blog post is devoid of any analysis and reads like a press release from Telsa’s marketing/communications department. For a in-depth analysis of Tesla’s China factory plans, Forbes has a good article by Bertel Schmidt titled “No, There Won’t Be A Made-In-China Tesla Anytime Soon.”

    http://www.forbes.com/sites/bertelschmitt/2016/01/26/no-there-wont-be-a-made-in-china-tesla-car-anytime-soon/#3f5054756ae5

    1. Djoni says:

      Most probably a fair view of the affair.

      Musk is overoptimistic and probably liked for that, I share that, but you also have to give some place to reality.
      China ain’t a bed of roses.

    2. tftf says:

      Sven, thanks for posting this important link. I overlooked your post when writing my comment below…

  3. Sveno says:

    China is a tough nut. You think you americans are “I always buy Made in USA” but thats nothing compared how the state enforced local consumption works over there.

    Moving production (not packaging) to China is very very hard. You’d have a significantly higher chance of success to order production as a service from a Chinese owned company. What makes it hard? The state makes it hard. They don’t need you, they don’t want you, they will barely tolerate you.

    1. mr. M says:

      Yes, musk is overly optimistic again. If you want the import taxes removed you have to give everything into chinese hands. Definitely not like it is done in Tillburg.

    2. mr. M says:

      BYD is changing the chinese market for EVs. They don’t need tesla to disturb anyone. The chinese market will reach the tipping point of 3-5% marketshare for EVs in less than 2 years. Be it with tesla or without doesn’t matter for them.

      1. Dan says:

        Exactly. Closest analogy is solar poewr. China moved into solar in a big way about 10 years ago and have gone from nobody to market leader to owning the market in the blink of an eye. We owe the cheap panels on the market today to the almost reckless abandonment of current market conditions in the way the Chinese built up massive panel production capacity.

        If the same happens in the EV industry, expect prices of EVs to plummet in the coming years. Not good for EV manufacturers but amazing if you’re an EV enthusiast.

  4. tftf says:

    The usual promises from Tesla. Once they start maunfacturing in China they will likely have to use another name and all sorts of restructions (plus waiting a long time for business licenses etc.):

    https://dailykanban.com/2016/01/no-there-wont-be-a-made-in-china-tesla-anytime-soon/

    http://www.forbes.com/forbes/welcome/#1e340b6e56ae

    1. mr. M says:

      If they could use a similar name (tesla 2) i should not matter.

  5. Pushmi-Pullyu says:

    @sven:

    Hey, thanks for giving what appears to be the straight dope on this. How depressing for hopes that Tesla can make cars in China for the Chinese market. I was hoping that they could just use a different badge, as GM uses the Opel badge for Europe. But if this analysis is correct, then Tesla would actually have to become a minority partner in any Chinese automobile manufacturing venture.

    sven said:

    “You think you americans are ‘I always buy Made in USA’…”

    Well no, we don’t. We like to talk up the idea of “Buy American made!”, but this is an ideal which, to quote Shakespeare, is “More honor’d in the breach than the observance.”

    For instance, everyone knows that a rather large portion of what is sold at Wal*Mart is made in China.

    1. sven says:

      “You think you americans are ‘I always buy Made in USA’…”

      Actually, Sveno said that, not me.

  6. Speculawyer says:

    I still think it is really unfair the way China still has these massively protectionist policies. I’m pretty sure they now have the biggest export surplus on the planet . . . how in the world are they allowed to keep having such protectionist policies.

    This is a nerve that Trump has struck. I don’t back him but he is wise to bring up some of these things.

    1. G2 says:

      The ‘Rump only does and says what he feels will be popular today and will spin on a dime should his self interest dictate it. He is like that morphing cop in T3, but with a bad rug.

      First and last thing I’ll say about The ‘Rump on this post.
      Please carry on with the good discussion about cars and Tesla, gentlemen. 🙂