Estimates seemed to be in the same ballpark, but Tesla says it'll cost a lot less

Last month, Tesla confirmed that the company is planning on building a Gigafactory in China. The U.S car maker reached a preliminary deal with the local Shanghai government. In turn, this allows them to finally proceed with the Chinese Gigafactory plan. However, Tesla didn't reveal how much the factory will cost or how are they planning on paying for it. In the last few weeks, analysts have thrown several figures around. Most of them were in the $4-6 billion ballpark, but none were conclusive or confirmed the company.

Today, another anonymous source reported on the same issue. A story revealed by Bloomberg, based on an anonymous source close to the matter, claims that the factory will cost $5 billion. Additionally, the source conveys that the carmaker is seeking a local partner for the investment.

“The electric-car pioneer is considering raising some of the $5 billion it intends to invest in the plant near Shanghai from local partners, according to a person familiar with the plans, who asked not to be identified as the matter is private.”

Last month, Tesla said that they expect to break ground on their new China venture in the "near future". It would take roughly two years for the project to be completed and for the first vehicles to roll off the production line. Then, it would take another two to three years to ramp up the production to 500,000 vehicles per year. A number that would fully satisfy the local Chinese market demand.

Last evening, during the Q2 call, Musk suggested a much lower cost though:

“We’re confident we can do the Gigafactory in China for a lot less. I think it’s probably closer—this is just a guess—to $2 billion. That would sort of be the 250,000-vehicle per year rate. So, I think we could be a lot more efficient with cutbacks and that would include at least the battery module and pack production, body shop, paint shop, and general assembly. It might even be less than that.”

Additionally, Musk even said that all future Gigafactories will have to be able to produce both the complete vehicles and the battery cells needed to power them. The Chinese Gigafactory might as well be the first one of such factories.

For Tesla, China is the second largest market in the world. The potential is huge. The ensuing trade war between the US and China is another deciding factory in how fast the factory gets build. However, while Tesla currently has just under $4 billion in funding, the rest will have to come from an outside investor. Whether the car maker opts for an out of country investment, or find somebody within China, still remains to be seen. Musk said that Tesla doesn't wanna issue new bonds or equity, so some kind of a loan or an investment from a locally owned bank or enterprise will be needed.

But, as we all know it, that comes with a few caveats. After all, most banks and enterprises in China are controlled by the state - in one way or the other.

Source: Bloomberg