Tesla breaks ground on Shanghai plant as trade war lingers
Tesla breaks ground on Shanghai plant as trade war lingers
Matthew DeBord Business Insider
08 January, 2019, 20:45
The factory, Tesla's first in China, marks a major bet by the EV maker as it looks to bolster its presence in the world's biggest auto market where it faces rising competition from a swathe of domestic rivals, while its earnings have been hit by increased tariffs on United States imports.
In China, the billionaire-entrepreneur faces a vehicle market that probably shrank a year ago for the first time in at least two decades as uncertainties surrounding the trade fight between the world's two biggest economies, signs of weakening domestic demand and a stock-market slump take their toll on consumers.
The electric vehicle company welcomed the developments after enduring a series of gaffes and an Federal Bureau of Investigation probe on allegations Mr. Musk had deceived company investors.
Until now, foreign automakers that wanted to manufacture in China were required to work through state-owned partners.
Tesla's Chinese factory broke ground on Monday afternoon (Jan 7) in Shanghai where it will begin making Model 3 electric vehicles (EV) by year-end.
The Shanghai plant would supply the "Greater China region" with "affordable versions" of the Tesla Model 3 - the carmaker's first mid-price, mass-market vehicle - and its planned Model Y, Musk tweeted.
"Aiming to finish initial construction this summer, start Model 3 production end of year & reach high volume production next year", Musk wrote in a separate post on Twitter.
Tesla, based on Palo Alto, California, global automakers including General Motors Co., Volkswagen AG and Nissan Motor Corp. that are pouring billions of dollars into manufacturing electric vehicles in China. Meanwhile, electric models from Nissan began rolling off a production line in China in August.
Tesla's Shanghai venture comes as USA companies face pressure from Donald Trump to keep manufacturing jobs at home, and as Beijing and Washington persist with a trade spat that has seen both sides levy tariffs on hundreds of billions of dollars of products. The lower tariff will last until the end of March pending trade talks.
The electric automaker purchased the site a year ago for roughly $140,000 and intends on building the 860,000-square-meter site far quicker than is typical of automotive factories, Forbes reports.
Tesla has been pushing forward its plans for the 500,000 vehicle capacity plant after it secured a site in October, hiring staff, starting procurement for building materials and setting up a local financial leasing company.
"And the competition is getting more and more fierce".
But since Tesla announced plans for the factory on land outside Shanghai's urban core, the outlook for China's consumer market has turned worrisome.
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