Report Says Tesla Gigafactory In China Will Cost $5 Billion, Tesla Disagrees

Tesla Model S driving


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

Categories: Tesla


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12 Comments on "Report Says Tesla Gigafactory In China Will Cost $5 Billion, Tesla Disagrees"

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I am guessing most of the reporters or Tesla shorts have never been to China or even outside of their own states, they just have zero clues on how other parts of world operates. Mark my words, Tesla China will be the cheapest to build, fastest to complete, most efficient, and most productive Testa factory.

It looks like an example of the classic attempt to force companies to release info by publishing outrageous info from anonymous sources, and then force the company to correct the record.

Not sure I understand how this isn’t consistent with what Musk said, other than the amount required. He said they will finance it with local chinese debt.

With China being a much more EV friendly country than the US, I expect the Chinese government to offer nice incentives to Tesla to build the factory along with building battery cells and pack there.

While those ‘currently’ in power in the US are primarily focused on the interest of oil companies which will keep the US out of step with the rest of the developed world, in China the interest is on the health of the Chinese people and their environment and backed by their government.

So yes, I see the new Tesla Gigafactory in China to be the biggest, most efficient, most technologically advanced, and highest producing EV factory in the world.

So looking at Tesla’s timeframe, they should have 2021 models rolling off the line by the end of 2020, which should be with the launch of the Model Y

Yes, China gave Foxconn $1.5B in incentives for their factory, plus they built out infrastructure, even a power plant for them. Tesla will get similar concessions from national and regional gov’t’s. Really no different than in the US, but with the added advantage of streamlined red-tape that China is famous for when the deal is worth enough $$$ to China. Drawing a Tesla factory to China would be a major victory for China at many levels.

This is how the game is played. (don’t hate the player, yadda yadda) It is also why they don’t announce actual factory locations until the deals are inked for concessions. It hurts their negotiating power to name where they are going, they want locations to compete to get their factory (like Amazon’s search for a new host city).

I think raising local debt is going to be easy for Tesla and they can fund it from the proceeds of the Tesla sales each month in China. Besides, Tesla’s advantage is that they have existing plant that is operational (no surprises in ramping up) so the risk of getting into production is low. The volumes produced can be exported to Europe as the tariffs are lower. As for IP protection, Tesla being paranoid and careful should make things OK for them. Think how Apple does it. Tesla would be similar.

Just ask Jim Chanos- I think I heard his estimate was somewhere around $50 billion..

Maybe Consider Every Failure Tesla Has Had, in Ramping up Battery Module and Pack Production for the Model 3 has been, kind of in Edison’s words, “Not a Failure, but just 1 more step closer to a Success” (Not a Quote, but a rough Paraphrase!)!

Plus, as Tesla refines their skills more on the Model 3, on the way to 10,000 units per week, this rate then becomes a new “Base” for them, at a new Factory, in 12 to 18 Months, once local Staff are up to speed on the processes.

Between Battery Pack Bottleneck Solutions, Fabrication to Body in White, Paint, and General Assemblyrefinements: training new staff may also be easier, and some staff that work the lines, in China, might be brought over State Side, for initial Training, to have them ready to “Hit The Ground, Running”, in China, when the plant is ready for them!

You would think other manufacturers would be a lot better considering all their failures.

Q2 2018 Shareholder Letter:

“In July, we announced our plan to build a wholly Tesla-owned Gigafactory 3 in Shanghai – our first Gigafactory outside the US. We are excited about this opportunity, as China is by far the largest EV market in the world and Chinese support for electric vehicles has been exceptionally strong. Initial capacity is expected to be roughly 250,000 vehicles and battery packs per year, and will grow to 500,000, with the first cars expected to roll off the production line in about three years.”

That means that the first EV’s will be produced in Shanghai in 2021.

Trump should tax made in China Tesla if they ever attempted to export to US! Tesla should have set up another assembly plant in empty under used Midwestern state that literally cost them pennies! So US taxpayer subsidized technology is going to be transferred to China for nothing? Pathetic US government officials! Fremont plant even at it’s peak production managed by Toyota only churned out 300K single model! How can Musk churn out double that amount with several models is pure lie and fantasy! It’s different when you make one prototype than tens of thousands!

You are right about “Pathetic US government officials”. Especially the idiot we have for president.
I would think building Teslas in China makes great sense to Tesla: cheap steel to build the gigafactory, cheap labor, a government that supports the environment, cheaper cost of materials like Aluminum, cobalt and lithium, etc.
Trumps tarriffs is probably why Musk chose China for the gigafactory.