Tesla inks deal to build second factory in Shanghai

11 July, 2018, 02:24 | Author: Regina Lloyd
  • Elon Musk speaks at Boring Company community meeting in Bel Air Los Angeles

But the latest retaliatory tariffs mean importers will have to fork out a total 40 percent duty on all US -made cars they sell in China.

A year ago, Tesla said it was working with the Shanghai government to explore local manufacturing. Local production would also allow Tesla to reach a wider audience of buyers in China and in the Asia-Pacific region, offering lower prices and tailoring the vehicles' offerings to the tastes of the local market.

The announcement came just as Tesla raised prices on its vehicles in China to offset the cost of tarrifs imposed by the Chinese government in retaliation for USA tarrifs recently levied on Chinese goods. Tesla produced 5,031 Model 3s in the last week of the second quarter in its Fremont plant, meeting a target that Musk had said was crucial to generating cash and earning profit.

The memorandum of understanding is a major development in a more-than-yearlong effort by Tesla to open China's first production facility to be wholly owned by a foreign carmaker. I'm sure Musk is just thinking "as soon as possible!"

The Shanghai government suggested it could help with some of the capital costs.

Tesla CEO Elon Musk was in Shanghai Tuesday to appear in a joint announcement with the city government.

Tesla said Tuesday's announcement will not impact US manufacturing operations, which continue to grow. The country has a stated goal of 100-percent electric vehicles by 2030, as part of its plan to tackle air pollution, so a Tesla plant in the country makes sense. It'll take another two to three years for the factory to reach its capacity to build about 500,000 vehicles annually. China accounted for 17 per cent of Tesla's revenue for 2017, according a filing with USA regulators.




Tesla hasn't provided an estimate of what the factory might cost to build.

"Tesla is deeply committed to the Chinese market, and we look forward to building even more cars for our customers here", the company said in its emailed statement.

Tesla follows Harley-Davidson in charting plans to expand outside the USA to circumvent tariffs under Trump's escalating trade disputes. The South Carolina BMW plant, the company's largest in the world, is also the largest source of U.S. auto exports. After the tariffs were imposed, sales dropped 30 percent.

Volkswagen (VOWG_p.DE), meanwhile, said it will cooperate with China's FAW Group (000800.SZ) on technologies including e-mobility, connectivity and autonomous cars.

Prices of Tesla vehicles sold in China have increased by over $20,000 thanks to the ongoing trade war between the United States and China. It's been an idea Musk has mentioned to investors since previous year. After China announced in May that it planned to scrap by 2022 the rules on capping foreign ownership of new-energy vehicle ventures, Tesla registered a new electric auto firm in Shanghai.

Anticipation about a potential big Tesla investment had bubbled over the past year, with expectations spiking after Bloomberg News reported that Tesla boss Elon Musk would travel to the city on Tuesday.

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