Tesla Says Chinese Factory Is Beginning To Make Sense


Tesla Model X In China

Tesla Model X In China

Tesla Model 3

Tesla Model 3

With China being second only to the U.S. in Model 3 reservations, Tesla says it’s beginning to make more sense to construct a factory in China.

Ren Yuxiang, Tesla’s Asia Pacific boss, confirmed that China is #2 for reservations, but wouldn’t disclose exact regional figures.

Tesla’s J.B. Straubel “told China Daily newspaper in Germany on Thursday that once he sees a greater uptick in sales for the new and more moderately priced Tesla, then an assembly line starts to make sense,” according to a report by Forbes.

By building the Model 3 in China, Tesla would be exempt from charges placed on imported cars. However, China requires automakers to form partnerships with local companies in order to sell in China.

Forbes adds:

“Speculation that China would get a Tesla factory began last month when Jon McNeill, Tesla’s president of global sales, said that the EV maker’s No. 2 market was a potential candidate for an assembly line.”

China’s booming electric car market makes it a prime location for Tesla’s second factory, but partnering with a local automaker is probably not in Tesla’s best interest. Perhaps Tesla could find a way to have that requirement lifted?

Source: Forbes

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47 Comments on "Tesla Says Chinese Factory Is Beginning To Make Sense"

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Tesla Through the Looking Glass? They Musk, be mad.
“Of course,” responded the cat, “everyone here is mad, and since you are here you Musk be mad too.”

Madness is building a billion dollar business in a country that won’t allow you to sell your product….and succeeding.

I don’t think China restricts sales of vehicles built in its country and will benefit from jobs and exporting vehicles.

How many Country’s block Tesla sales within its borders. Is it just the US?

LOL! So true! The so-called communist country fosters better capitalism than “the land of the free”. China even has lower corporate tax than US.

My buddy opened a tool & mold company in China …There are “No Taxes What So Ever”.. He keeps all the Money he makes “Every Last cent! All of it! and it’s all on the Up & Up. Totally Legal!….

No, it is not on the up and up. He pays no taxes for goods that are exported. If he competes against local companies, he pays taxes. Nothing like that is on the up and up.

Sorry, I happen to know something about Chinese law. They have taxes. If he isn’t paying ’em, he’s cheating and could get into very serious trouble if the authorities decide to crack down (which they occasionally do).

of course that communist country, with its lack of environmental regulations, has pollution a lot worse than anything that you would see in the US.

there are a lot of things that I don’t like about the US, but for people like you, its easy to write about how much better other countries are when you have never been there yourself.

You just omit to say that most of this pollution is generated to make OUR crappy consumer goods. It’s win-win for the corporation cartels, : cheap labor and externalization of their pollution… our pollution.

what you omit to state is that if they had better environmental regulations, they would be able to make the “crappy” stuff without creating so much air pollution.

But then it wouldn’t be cheaper you would have to add the cost of those environmental controls into the bottom line. And remember cheaper is the primary reason for Offshore Manufacturing. What’s really sad is Americans are being sold out to foreign
countries taking the jobs overseas all in the name of the Mighty Dollar.

You don’t have to live in China to see that

a) China claims to be communist country
b) US doesn’t allow cars made in US to be sold everywhere in US
c) China has lower corporate tax than US

To think that high (highest!) corporate tax is used for environmental regulations is simply wrong. Out of $3500 billion US budget, EPA is less than $8 billion (0.2%) while about 20% goes to war department. It’s not the military that’s keeping the environment clean.

To learn about anything, you don’t have to live there. In many ways, learning about them at a distance is gives far more objective view since local distractions don’t cloud bigger view. For example, many in US claim how awful China’s human rights record is, yet US imprisons far more of its citizens than China and almost everywhere else, and blacks are prisoned at insanely-ludicrous rate. You hardly notice that while living in US.

i do not know your statement “US doesn’t allow cars made in US to be sold everywhere in US” to be true. there are a lot of cars that can’t be sold in the U.S. that’s because there are regulations in the U.S. and if you want to sell cars in the U.S. you have to comply with the applicable regulations. if not, then you don’t get to sell your stuff here.

if you don’t like regulations, then you might want to try moving someplace like western sahara (which doesn’t have a government) and see how you like it there.

I wonder the difference in reservation numbers between US, China, and Europe. All that time and resources spent in Europe and Tesla hasn’t made that much progress. Europe is one tuff nut to crack.

One thing that have stop Tesla in Europe is the price because of stronger dollar. Then P85D come out it cast about 1,2 million Swedish kronor in Sweden if you took all options. If you want a full loaded P90D now in Sweden it cost about 1,6 million kr. I know that it’s hard to make a different between countries with different tax etc. but if the prices haven’t got up so much in Sweden I belive the sales would be a lot higher then there are now.
It does sales more Model S in Sweden this year compere to the same period last year but the growth would be a lot higher if it wasn’t for the higher price.

What can you buy with s70 price?

1.6 million kr is about $190,000; a fully loaded p90d in the US would be around $140,000, so there is more than just exchange rate difference going on.

I don’t know what Sweden offers by way of electric vehicle incentives, but I believe that the value added tax in Sweden is around 25%.

I can not believe the world is letting the chinese government get away with this.
If it does not stop, the other countries should then ban any and all chinese companies from doing business in their land unless they enter into partnerships.

China is the number one market in the world. Seems like they have a the leverage. No one is forcing any automakers to sell there.

That’s exactly what the Chinese said. Nobody is forcing you to sell here. However, if you want to sell cars here on a level playing field without punitive taxes, then we must have access to your technology so that later on, we can form our own companies and beat you using our new-found stolen technology.

Hence the rule that foreign automakers must form Joint Venture (JV) with Chinese companies. The Chinese JV partner must own 51% of the JV.

The blame here rests on Wall Street. CEO’s look for short term gains only and sell out their country and company.

“The blame here rests on Wall Street. CEO’s look for short term gains only and sell out their country and company.”

Why is it only short term gains? It all sound like a long term gain in a potentially very profitable market.

If you have plants in China, then why are you afraid of Chinese competitions? The so called technology threat is much lower in automotive world since it is often the cost that determines profit.

Nobody is requiring Tesla to enter China either, is Elon Musk greedy too for short term gains?

You clearly know nothing about the Chinese desire to steal IP and capitalize from stolen IP.

Tesla is willing to give away all IPs for the sake of EV technology spreading. So your point doesn’t apply to Tesla’s case.

Actually no. Tesla did NOT give away all its IP. It gave away patents, which cover the car. The way they manufacture is a trade secret.

Their leverage is not that big.
They are expanding more and more abroad.

Also governments like ip transfer less and less.

America has a long history of trade hypocrisy.
The Republican Party was founded on opposing slavery, and supporting protective tariffs to build up the North’s industrial economy.
The US must have been an attractive market for foreign capitalists, because despite these tariffs, we had no shortage of British investment building our railroads. The US was the world’s biggest debtor, and our biggest foreign creditor was Britain, whose domestic industry was beginning to rot. When the crisis of 1914 hit, the US was perfectly positioned to hold its patron hostage.

So give Beijing credit for studying history.

The US was also famous for not respecting foreign copyrights or patents. You had to manufacture or publish in the US and the first *US* publisher or inventor got the patent.

“By building the Model 3 in China, Tesla would be exempt from charges placed on imported cars. However, China requires automakers to form partnerships with local companies in order to sell in China.”

That is absolutely false statement! And people are just feeding the misinformation over and over again.

It is completely wrong!

China doesn’t ban you from selling in China without partnership. Tesla is selling right now!

The requirement is that if you want to avoid import tax, then you would have to have factory that is partnered with local company. That is the requirement which is different from other countries where you can have wholly owned factories by foreign company and avoid local import tax.

The rules only apply to several key industries such as automotive, electronics, advanced materials…etc. It is set by WTO rules and negotiation that China and all trading partners did when China entered WTO. It does have an expiration date as well.

“Perhaps Tesla could find a way to have that requirement lifted?”

Good luck wirh that, every foreign car maker had/has to change the brand name and enter a JV – including those producing local EVs (Venucia, Zinoro…).

True. Almost laughable to even suggest that the Chinese would do such a thing.

A Chinese factory wouldn’t be just for China. Presumably it would also serve sales in Japan, India, and other S.E. Asian countries — on a large, heavy product like a car long-range shipping is expensive & slow.

Mercedes,Audi and BMW don’t export out of China.

They would have to give half the profits to the local partner for sales in Japan, South Korea, Australia etc.

Export out of the US and you keep all the profits. That is higher even with transportation cost.

Could Tesla team up with BYD? Usually foreign companies doing business in China have to team up with a Chinese partner. BYD has the pedigree of having Warren Buffet as an investor and Mercedes as a partner. (a Denza update would be great) Not to mention they build they most electric vehicles/ PHEV in the world. I would love this considering I am an investor in BYD.

While I would usually pile on with the China bashing, … Tesla is open patent already … so what difference does it make?

Would the potential Chinese partner have access to much more than it has already?

It doesn’t.

The so called China bashing is typical of misinformation.

However, with all that said, it is true that Chinese import tax system needs a reform.

The system is setup and “alllowed” by WTO to protect developing economy and give it time to develop so they can compete with mature technology leaders in the developed world.

In the case of EV production, China isn’t really a developing market anyway since BYD is fairly advanced. So, at least for EVs, the complain is somewhat legit. China should treat EVs differently from other ICE cars as far as import laws are concerned.

Now, we all know what happens with import tax and Detroit automakers. Protection sometimes only hurt your own industry ultimately by making them lazy due to lack of competition globally.

a “developing country” tends to be determined based on gdp/capita; and while china has billionaires, most third world countries also have billionaires. in china’s case, most of the populations is out of sight from the gleaming towers and living in grinding poverty.

in the case of china, though, they are attempting to “play” the rules for uses other than those that were intended by the rules. by keeping wealth highly concentrated, china can become the largest economy in the world and still qualify as a “developing nation”, which is kind of ridiculous when you think about it.

Actually, many of china’s economic actions are NOT sanctioned by WTO, or the agreement that Clinton negotiated with China.
For example, China was required by WTO and IMf to free their money. But, they have not. Likewise, they were required to quit subsidizing and dumping, but again, they continue that with tires, concrete, steel, etc.

Tesla is an open source company but it does have trade secrets/intellectual property that is not in patents like its auto pilot software.

It does not share its auto pilot software for free.

Giving that to BYD or any Chinese competitor is a non-starter.

what does the statement: “tesla is an open source company” mean???

patents are, by definition, “open” documents. but that doesn’t mean that you get to use the patented content for free.

Yes, they would. Tesla, like spacex and solar city, has their real IP in the manufacturing, not in the vehicle. I think that is why Tesla will only make the model 3 and Y there, but not battery, S, X, etc.

Be carefull Tesla, I renember Samsung and LG bulding battery factories and just when they were ready Chinese Governmant devised a new law only busses with LiFePO4 are supported from grant :-).
For Tesla I could imagine: only cars without round cells get federal tax credit and than Tesla has the poop :-).

Elon will have to eventually go to China. It is the biggest automotive market in the world. Let’s see what “Uncle Warren” (BYD) will do to mentor Musk, in Tesla’s largest market entry deal yet. Lots of options in China, with little near term upside potential, until Elon gets production sorted out at home (U.S.) first. Get the first proof of concept Model 3 into its second year of production and bury the Chevy Bolt in sales and DELIVERY figures by at least a 3 to 1 ratio, for at least two years running. Then he won’t have as many distractions looming ahead. If he can’t get ahead of the Majors in Volume Production, with quality control by 2018, China will have wait until he gets profitable stateside.

First, I don’t think Tesla will be profitable for at least 1-2 decades.

Second, opening a new factory takes time.

Third, it doesn’t take much effort to bury the Chevy bolt.

Lastly, Tesla will have to compete with Toyota, Honda, Audi, BMW, Mercedes, etc…

As much as I like the Volt, I’ll drop it on a dime when Toyotamakes or Honda a 125 mile EV.

Please. If you get rid of the massive spending on new manufacturing lines, show rooms, service centers, and super chargers, Tesla IS profitable
It is the build out that is costing them greatly.

It feels like China is the new Japan. It’s time we remake, “Gung Ho.”

Nope, Japan was never ever like China is today. China makes Japan look like Sweden in terms of honesty, ethics, etc.

Think continental. Build one in Asia, Africa, South America and Europe.