The California-based automaker has been trying to plant its feet in The Middle Kingdom for more than a year.
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| © CNET Tesla will be capable of producing 1 million cars per year if both its Shanghai and Fremont factories reach their theoretical maximum outputs. |
By Andrew Krok, Roadshow
China is an important market to Tesla, and having to
deal with import-export tariffs and subsequent price hikes only makes
the market more difficult to penetrate. That's part of the reason why
it's excited to set up an actual factory over there.
Tesla and the Shanghai government have reached a preliminary
agreement to establish a Tesla factory over there. The automaker hopes
to eventually build some 500,000 vehicles per year at its Shanghai
plant. In a statement, the Shanghai government noted that this is the
largest foreign-invested manufacturing project in the city's history.
"Today,
we have signed a Cooperative Agreement for Tesla to start building
Gigafactory 3, a new electric vehicle manufacturing facility in
Shanghai," Tesla said in an emailed statement. "We expect construction
to begin in the near future, after we get all the necessary approvals
and permits. From there, it will take roughly two years until we start
producing vehicles and then another two to three years before the
factory is fully ramped up to produce around 500,000 vehicles per year
for Chinese customers. Tesla is deeply committed to the Chinese market,
and we look forward to building even more cars for our customers here."
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"We are glad to achieve strategic cooperation with Tesla, and we welcome Tesla's R&D, manufacturing and operations of pure electric cars
in Shanghai," said Ying Yong, Shanghai's mayor, in a separate
statement. "The Shanghai Municipal Government will give full support to
the construction of Tesla's factory and strive to create a better
environment and provide better services for the development of various
enterprises in Shanghai, including Tesla."
In response to tariffs between the US and China, Tesla had to hike prices
of its already-very-expensive Model S and Model X vehicles. A base
Model X now costs $140,100, a price hike of $20,000 and a whole lot more
than the $79,500 it costs in the US. This huge price disparity can
hopefully be remedied by moving Chinese-market vehicles to China. Until
the Shanghai plant is online, though, Chinese buyers will have to make
do with the prices as they are.
Elon Musk in 2016 had
originally hoped to be building 500,000 Teslas per year out of its
Fremont, California facility by 2018, but it's currently on target to
produce closer to 170,000. There have been more than a few hurdles in
getting Model 3 production online, but as the kinks are smoothed out, those numbers should keep rising.
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