Tesla breaks ground on Shanghai plant as trade war lingers

09 January, 2019, 14:39 | Author: Mary Valdez
  • Matthew DeBord  Business Insider

Tesla CEO Elon Musk announced on Twitter Sunday night that the company would break ground on its new Chinese factory on Monday.

Tesla's first gigafactory opened outside Reno, Nev., in 2016.

The $5 billion investment comes at a tenuous time in relations between the USA and China.

"Shanghai Giga will produce affordable versions of 3/Y for greater China", Musk tweeted Monday, noting the us sites will continue to construct higher cost versions and all Models S and X for the global market.

Gigafactory 3 was expected to produce around 3,000 Model 3 vehicles a week in the initial phase, ramping up to 500,000 vehicles per year when it became fully operational, Tesla said in a statement.

The official ground-breaking ceremony for number 3 will take place today to ensure that the production start of the Chinese Model 3 from the Gigafactory 3, which Musk himself is aiming for, goes smoothly at the end of the year.

The China plant is the result of years of negotiations with local authorities, and marks somewhat of a personal triumph for Musk who faced a disastrous 2018. China is the world's largest market for autos, and wants 7 million electric or hybrid cars sold a year by 2025, according to Bloomberg News.

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A local Chinese plant may be crucial for Tesla, which is struggling to stave off a potential dip in demand in the USA, its biggest market, after reductions in federal tax credits for EVs. The two sides have called a truce in their trade fight and are engaged in talks to cool tensions, with China temporarily scrapping a retaliatory 25 percent tariff on USA -made cars starting January 1.

The Shanghai factory would be Tesla's first production line outside the US.

Having control isn't likely to free Tesla from China's onerous bureaucracy nor safeguard its intellectual property, Mr. Russo warned.

Tesla plans to keep building the higher-end versions of the Model 3 at its plant in Fremont, California, and to make more affordable versions in China for that market and other parts of Asia. The country's slowing economy and its trade war with the United States have severely impacted the auto industry.

Tesla is eager to get the factory up and running as soon as possible so it can begin constructing select models locally.

Tesla purchased the land for the Shanghai factory just outside the city for approximately $140 million in October.

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