Tesla’s China Factory Will Make Model 3, Y – Not S Or X

Tesla Model 3


Tesla Model 3

Tesla Model 3

Tesla’s factory in China, which is in the final agreement stage, may be production ready in about three years, but it will only build the Model 3 and Y.

Just the other day we reported that Tesla CEO Elon Musk expects the China Gigafactory to be ready in three years. Although, he also said not to count on this as a sure thing. Musk’s words (via Teslarati):

“It’s sort of a rough target of start of production in about three years and it would be serving the China market and perhaps some other countries in the region and that’s really the intent.”

The automaker has decided not to heavily fund efforts in China for the time being until current issues are ironed out. Nonetheless, there will eventually be a factory in China that will produce the Model 3 and Y. Musk shared during the company’s third-quarter call:

“In respect to China, I wouldn’t expect any significant CapEx on China until 2019. It won’t be material in 2018.”

When we reported about the factory in China earlier, we were under the impression that it would also be responsible for the Model S and X. This makes sense since having access to the automaker’s entire vehicle lineup in the world’s biggest automotive market makes sense. However, now it seems that this won’t be the case. We also have no way of knowing for sure what the company’s plans are for Model Y production on our shores. Musk added:

“[Tesla] won’t be making Model S and Model X, but we’ll be making probably Model 3, probably Model Y primarily for the local Chinese market and it’s really the only way to make the cars affordable in China, but it’s three years out, so.”

The automaker has reportedly signed agreements with government officials in Shanghai and will open the factory in the area’s free-trade zone. This will help Tesla cuts costs, though, as we pointed out previously, the automaker will still be subject to China’s 25-percent import tariffs. Fortunately, having its own facility in the country means that it won’t have to partner with a local company and split profits.

Source: Teslarati

Categories: Tesla

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9 Comments on "Tesla’s China Factory Will Make Model 3, Y – Not S Or X"

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Makes sense.

The Model 3 is the future, not the Model S and X. Those vehicles were merely a means to arrive at the Model 3, and someday the Model 3 volume will far outpace the S and X.

Besides, in another 3 years, the Model S will be *8* years old, and you don’t tool a new factory for an old design. Tesla needs to do a significant update of that car soon, but I don’t see that happening with all they have on their plate right now.

It’s all about price-point … oh, parking (not many places to park a huge American-sized vehicle in China’s metros).

Putting the factory in an export oriented free trade zone and then paying import tax to sell in China makes no sense. There are other factory areas in China that are set up for domestic production. It would make the most sense to set up the China factory to eliminate the 25% import tax and be on equal footing with the Chinese automakers. I would imagine that the big barrier to this strategy would be the 50% domestic partner requirement.

Well said, thank you!

Agreed on Tesla’s likely reasons. Presumably shipping cost and delay is more than the 25% markup Tesla has to accept for refusing to abide by China’s restrictive policy. But they would rather sell fewer cars due to a 25% markup and keep all the profits than lose half of the selling price for each car and risk a “partner” Chinese company stealing all their technology just to make the Chinese government happy.

I wonder if they will use the China factory the way they use the Tilburg factory in Europe?

Build most of the S/X in Fremont, and finish the build in China to avoid import fees.

The Chinese government is clearly too smart to allow Tesla to use that kind of loophole. Also, it would benefit Tesla to do fully integrated vertically integrated manufacturing in that factory and even export some small parts back to USA for those plants to use.

Egads that’s terrible concept model Y render. It’s a jumped up sedan. Not a crossover.

The Tesla should be closer to the Volvo XC40 look, slightly more curved and sculpted, with the distinct Tesla front. But don’t slope the backend like the X.

I continue to maintain that Elon Musk will never enter into a 50-50 JV with a Chinese automobile Company because: Elon Musk must maintain 100% of the design, development and quality control of all Tesla-branded EVs produced in China, which cannot be done in the automobile joint venture environment now being imposed by China. The other equally big reason is: Tesla simply can’t afford the enormous cost of a JV in China.in the next few years. 2017 and 2018 are the make or break years for Tesla. In fact, many believe that a secondary offering will be necessary simply to continue financing US Model 3 production and Gigafactory start-up costs. An enormous JV investment or building its own factory in the Shanghai free trade zone is simply not possible for Tesla. Also, the 25% tariff on Teslas sold in the remainder of China would be totally unacceptable to Tesla. An Asian market IPO of a Chinese EV manufacturer is the ideal way to fund all start-up production costs for Tesla in China. The existing Li Shufu (Geely CEO) ) EV joint venture with Kandi Technologies Group is a possible way, given the high risk that most see in cooperating with… Read more »