UPDATE 2 – Tesla Announces New 500,000 Vehicle Factory Planned For China

JUL 10 2018 BY VANJA KLJAIC 37

Musk is set to appear at an event in Shanghai later today

According to sources familiar with the matter, Elon Musk, Tesla CEO, is scheduled to appear at an event in Shanghai later today. The meeting takes place in the midst of the brewing trade war between U.S. and China, affecting the pricing and eventually, the sales of the luxury all-electric vehicles. The tariffs come as a retaliation over the United State’s import duties of 25% instituted last week, impacting over $34 billion worth of Chinese imports to the country. Naturally, the Chinese government made sure to leave an appropriate response.

***UPDATE 2 – Tesla says reports are true. It’s a done deal. Tesla signed a cooperative agreement for Gigafactory 3 in China. As noted below, production is expected to be 500,000 annually.

***UPDATE – Bloomberg is reporting that Tesla is close to signing a deal that will create what’s being referred to as Gigafactory 3 in China. It’ll be able to produce some 500,000 vehicles per year and will likely be a primary site for production of the upcoming Tesla Model Y and a secondary location for Model 3 production. Here’s what Bloomberg states:

Tesla Inc. is planning a factory in China with a capacity for 500,000 vehicles a year, its biggest step beyond the U.S. so far, according to people familiar with the matter.

Tesla is due to sign a memorandum of understanding with local entities in Shanghai, the people said, asking not to be identified as the information isn’t public.

This. in turn, made the prices of the Tesla Model S and Model X in China skyrocket. Currently, the Tesla Model S and Model X prices have increased by 150,000 yuan to 250,000 yuan (~$22,600 to ~$37,600), respectively, depending on the version.

While the tariffs may be one part of the equation here, to our knowledge, they are only speeding up the talks about a Gigafactory that Musk intends to open up in China. For Tesla, that would mean bypassing the imposed tariffs. In turn, that would allow the U.S. car maker to cover one of the most appealing and future-proof markets in the world with the competitive price vehicles. To make matters even worse, Tesla Motors is currently part of just a handful of luxury car makers that don’t produce cars locally in China. And that, if not rectified, could hurt the company in the long run.

Musk confirmed the Tesla’s factory bid in China in a Q1 2018 earnings call. But, there have been some issues regarding the matter. According to sources, some reports emerged that Tesla is having issues with the local Shanghai government concerning its factory ownership. In one hand, Tesla is demanding sole proprietorship, while China’s officials were supposedly calling for a local partner. Later on, the report was followed by a strict denial of any disagreement from Shanghai officials, stating that the local government and the electric car maker are on the same wavelength over the matter. This was followed by the Chinese officials revising their ownership laws, allowing a permit to be granted to Tesla, allowing the company to operate and establish a solely-owned factory in the country.

Tesla’s future does look seemingly bright in the long run

The Chinese trip also comes in the middle of what Musk called the “short burn of the century”. Tesla needs to become profitable, and right now, the time is right for that to happen. Musk’s trips to both Shanghai this week and his previous visits to Beijing are coming as appropriate ways of electrifying its shareholders and investors – some of which was shaken last week when Tesla revealed subpar Q2 2018 delivery and production numbers.

The announced trip to China already impacted Tesla’s stock (NASDAQ:TSLA) as their investors appear to have experienced a new bout of confidence, pushing the stock up 1.29% at $312.86 per share during Monday’s intraday, thus ending a weeklong nosedive. With the prospect of opening a local production facility in the world’s most populous country and one of the world’s most sprawling economies, all in the midst of a burning trade war might actually mean that Tesla gets pushed over the brink of profitability real soon.

Source: Teslarati

Categories: China, Tesla

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37 Comments on "UPDATE 2 – Tesla Announces New 500,000 Vehicle Factory Planned For China"

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Mister G

GO TESLA GO
GO BYTON GO
DESTROY DIRTY GAS GUZZLERS AND DIESELS CONNECT THE DOTS ON CLEAN AIR WAKE UP EARTHLINGS co2.earth

windbourne

oh please.
EVs in China are fed by coal, not by AE.

koz

Yeah and that’s set in STONE forever and ever. FYI, their energy mix has changed a bit in the last few years and the change is accelerating.

Ron M

China is the leader in Wind, Solar, Hydro and EV’S. China us rapidly moving away from fossil fuels. It’s Trump that still thinks fossil fuels are the future and I guess his supporter’s because they believe every lie he tells.

James

Yeah keep them tents coming

David Green

Time for another capital raise… 500K? I love the capacity, Elon said as late as late last year that Fremont is capable of 700K a year, now Tents and all they have hit 140K over the last 12 months produced. but ramping…. haha!

Kbm3

Very poorly reasoned. Trying to tie the yearly production to the tent when it only had an impact on the late Q2 production.

Wow. How embarrassing!

Feel for you.

David Green

haha! don’t worry about me, I will be fine….

ffbj

Time for shorts to cover, agin, ha, ha.

windbourne

and you have how much in shorts on tesla?
Hopefully, you have enough of a backbone to back up your stuff, and short tesla with everything that you have.
after all, if you believe in this, then you will be worth many times more on shorting.
so please do not tell us that you are a spineless hypocrite.

Counterpoint

The article listed the potential new factory in China as a location where the yet-to-be-revealed Model Y will be produced. Based on previous comments from Tesla surrounding the possibility of a Chinese factory, it seems likely that it will solely be making Model 3 and Model Y for the Chinese market at that factory. It still does not solve the need for additional factories in other parts of the globe.

That said, it can be an important way for Tesla to grow in brand recognition and sales in one of the biggest markets in the world.

Viking79

China is the largest auto market worldwide.

windbourne

yes, but only at the low-end. at the middle to high-end, china is not even close to europe or america.

Mark.ca

So? The vast majority of buyers around the world are low end anyway.

Dan F.

Low end is not relevant to Tesla now and for the foreseeable future; they are working hard to get profitable the way the other luxury brands are, by making cars for which people will pay a premium price.

yo

The vast majority of buyers in China buy VWs first and foremost but also Toyotas, Nissans, etc…

https://bestsellingcarsblog.com/category/china/

Nix

They have been pushing into the middle end much more over the last decade. It isn’t the 1990’s anymore.

Viking79

Please site a source for that for recent year (like 2017 or 2016). Luxury brands do very well in China.

Nope… it’s the largest luxury market as well, and has been so for a while.

Magnus H
Terawatt

So how long before the next round of capital raising..?

Tesla might be able to become cash flow positive in the second half of the year if it doesn’t invest heavily. This sounds like pretty heavy investing to me. And that may be the right thing to do. But where’s the capital going to come from? If the answer is operations, don’t expect much to happen with GF3 anytime soon.

By the way, where is GF2?!?

David Green

Buffalo New York… Solar… Not using it for much right now, although Panasonic is going gangbuster in their part of the factory.

Nix

Hey, at least you are figuring out that Tesla would be cash flow positive if it weren’t for their heavy investment into future ROI.

That’s a step forward.

Although it is actually nothing new. It is exactly how Tesla has been operating for years, where they would be cash flow positive if it weren’t for their heavy investment into future ROI.

Are you seriously complaining that Tesla is going to invest money into breaking into a new market in a big way? You think this is somehow something to be Concerned (oh so very Concerned) about?

antrik

That didn’t sound like a complaint to me?…

Viking79

From the about $8B worth of Model 3 cars they will sell 2H2018.

David Green

If Tesla hits targets $8B should be close, I like to reduce their targets by 25% as a starting point of conversation, so lets start at $6B in 2H 2018 from Model 3, but that will prove to be a high estimate.

HH

Any word on financing?

Eloon

I would build a great factory, and nobody builds factories better than me, believe me, and I’ll build them very inexpensively. I will build a great great factory on our Chinese frontier and I’ll have China pay for that factory!

ffbj
windbourne

this is a horrible mistake by tesla.
This is only to be used by china to get the manufacturing technology.
GF3 really should be in Europe.

antrik

I don’t think China has much to catch up on manufacturing technology. Their PV plants for example are the most automated in the world AFAIK.

Also, Tesla specifically waited until they were allowed to open a factory *without* forming a joint-venture with a Chinese company…

Benz

That’s right.

Development in China in the past few decades has been amazing.

Nelson

The best way for China to respond to US Tariffs would be to eliminate their use of Coal and Oil, and become energy independent.

NPNS! SBF!
Volt#671 + BoltEV + Model 3

Benz

No official statement or announcement from Tesla?

Seven Electrics

This is a smart move on many levels. Manufacturing in the U.S. was, and is, a terrible idea.

Of course, with no joint venture, Tesla’s IP will be targeted by China’s national corporate espionage teams, which is likely why they were cut a special deal. It serves the national interest to copy advanced EV technology.

Benz

Elon Musk said that it will take at least another 4 or 5 years to complete the Gigafactory in Nevada.

How is it possible that the Gigafactory in Shanghai will be completely built within about 3 years?

Is the Gigafactory in Nevada less important than the Gigafactory in Shanghai?