Tesla CEO Elon Musk: “Long-Term There’s No Question We’ll Have a Factory in China”

JAN 24 2014 BY ERIC LOVEDAY 17

Tesla Website China

Tesla Website China

“Long-term there’s no question we’ll have a factory in China.  There is an argument for having that be our first major factory outside the U.S.”

Tesla Model S Goes On Sales This Week In China From About $121,000 USD

Tesla Model S Goes On Sales This Week In China From About $121,000 USD

Those are the words of Tesla Motors CEO Elon Musk.

As Musk says, Tesla’s “fair price” on the Model S in China will likely lead to sales of the Model S there matching the US in 2015:

“It could be as big as the U.S. market, maybe bigger. I don’t want to get overexcited about it.”

“Even without building there locally, it’s always going to be the second-biggest market after the U.S.”

Why construct a Tesla factory in China?  The answer to that is twofold:

1. Local production will allow Tesla to avoid shipping costs, taxes and to get the Model S to qualify for China’s zero-emissions purchase incentives (only applicable for vehicles produced within China) – per Elon Musk.

2. A Chinese factory will drive down production costs, which we think might be vital to Tesla’s goal of selling the Gen III (Model E) at the mid $30,000 price it’s targeting.

We’ll point out that Musk made no mention of building the Model E in China.  That’s an assumption made solely by us.

Source: Automotive News

Categories: Tesla

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17 Comments on "Tesla CEO Elon Musk: “Long-Term There’s No Question We’ll Have a Factory in China”"

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Let the flood gates of outsourcing open up in that once this factory is built in China it will become a corridor for the bulk of Tesla’s parts that they make in California to be outsourced.

Tesla’s CA factory is automated enough that there isn’t likely to be meaningful savings to be had in labor. They’re using a lot of parts from domestic suppliers, too, whose quality they’ll have confidence in with and will be cheaper to ship to CA.

The risk of brand damage is too great, IMO, for them to go down this road you suggest.

I wonder if he appreciates he’ll need to control knock-offs, and more rapidly have to confront unsanctioned parts competition. It can cross the Pacific quite easily.

Anyone want to guess whether a Chinese Tesla/CHAdeMO adapter would cost less than a cool thousand?

I think if some of the companies in China where able to dissect a Tesla model S they would have the model E knock off on the road with in three weeks in China.

A knock-off CHAdeMO adapter very well may cost less, but I think Tesla owners are buying on quality rather than price.

A dodgy 480v appliance can kill you rather quickly.

To understand the magnitude if the risk, look no further than the cheap knock off iPhone chargers that killed people. At 120v and tiny conductors.

http://m.computerworld.com/s/article/9241392/Death_in_China_prompts_Apple_to_offer_iPhone_charger_disposal_and_discount

“We’ll point out that Musk made no mention of building the Model E in China. That’s an assumption made solely by us.”
————

But maybe they will build the Gigaplant in China.

I think the first Gigafactory would be in the USA, serving the Fremont plant. Plenty of the expertise required, plenty of sun and the US location will make it easier to manage. Once Fremont is full, then Tesla can begin negotiation on building in China for the Chinese and Asian markets, waving the prospect of Gen 4 as an incentive. But, Tesla has a long way to get to that point.

No, that will be in the good old USA, if you mean the battery one. Maybe a ModelX/S factory, as it would probably take many years to fill the desire for those high end models throughout Asia. The Model E will probably built in part of their current plant.
3 years at the earliest factory wise in China, is my guess.

Batteries are heavy, so you don’t ship them around if you can avoid it.
So battery production will remain in the US with their gigaplant.
Plants for Europe and China may follow.

I know this is going to sound a bit petty… but I really liked the idea of Teslas, at least for the US market, being made in America. Chinese people can buy Chinese-built Teslas, but I would prefer to buy one built in America knowing that it helped support some fellow American families.

It is not significantly cheaper to manufacture cars in China and on a long run it is not it is not even wise, because knowhow of manufacturing is transmitted into China. Therefore it is making China stronger competitor.

But local production is more or less necessary due to logistics and because China is wise enough in economic policy that they require significant import duties.

If Finnish politicians were wise, they would do everything to crap Tesla’s European factory, but I really do not think that they will do anything.

Hmmm…Tesla has made a lot of great decisions but I’m convinced their agressive move into China at this time is one of them. I take Elon’s comments about siting a future plant there with a grain of salt. That may very well happen at some point but I think his comments at this time are meant as much for publicity and getting the Chinese consumers attention as anything else.

My concern about such a large emphasis in China now is that it appears to be a much higher risk for sales that they could achieve with other lower risk efforts. Even with their “fare” pricing model, it comes to $120,000 in China. Sure, China is the largest light vehicle market but they are not the largest luxury vehicle market. US and European markets are larger and possibly Japan too (someone with market data, please chime in). Japan and South Korea could be covered with sales, service, and Superchargers much more cost effectively. Tesla should certainly be thinking of China and have plans to sell there but I think they should have better fish to fry now and build the inertia of their business more first.

If you look at country markets then then the luxury market goes like this. 1. USA 2. China 3. Germany
And some sources say that they chinese luxury market will be the largest in the world before 2020.

I don’t know how a combined market of different european countries would look like though…

And they already sell cars in Japan which they will ship with a Chademo-adapter. There are Chademo chargers everywhere in Japan so the need to build the super charger network fast isn’t as critical as in other markets.

The South Korean car market is a lot smaller than Japan/China/Germany/USA also.

If you look at number of millionaires per country Tesla are in almost all the top 20 countries. I don’t know if Taiwan is included in the China/Hong Kong plans but it should be soon if it’s not.

In the top 20 of millionaires (2010) they are not selling cars in 15. India, 17. Brazil, 18. Singapore, 19. Saudi Arabia and 20. South Korea.

India is a big mess. Brazil is too large.

Singapore, Saudi Arabia and South Korea are good both in size and stability. But they won’t get into Saudi Arabia until they have perfect cooling for the batteries (and I’m for some reason imagining super chargers inside a glass half sphere with constant cooling, something really amazing).

So in other words the next two logical markets would be Singapore and South Korea.

Large Asian market, lower startup and operating costs, and higher incentives? It makes perfect sense to manufacture and/or assemble in China. I think Elon envisions growth such that he would be a fool not to consider global production. What is made where, and then shipped can be left to the bean counters and QC.

Brazil is large, but the majority of the population lives in the east, within Tesla range of the coast and mainly in the Southeast of the country.

Also, Brazil has very good solar resources, so once Tesla develops its canopies and battery backup, it should be able to run a Brazilian network quite efficiently.

He’s talking of the future. China will be the number 1 or 2 market, and if the Model E hits target it will be very successful there, They need to add manufacturing capacity and China will be an obvious priority for new capacity.

USA.
China.
Europe.
Other markets?