Tesla China factory to begin production next year

12 Dec 2018

TeslaTesla Inc. plans on expanding its business and starting production in China in the second half of next year, Bloomberg reports.

The China factory requires more than 200 acres of land and is based in the Lingang development zone in south eastern Shanghai. The plant, known as Gigafactory 3, will be the largest foreign-invested manufacturing project in the city and is expected to cost several billion dollars to build.

The California-based electric car maker is aiming to avoid the risks caused by China and the U.S.’s trade war – such as higher tariffs with the importation of vehicles. China is Tesla’s biggest market outside the U.S., but the company said that the 40% duty that China levies on cars bought from the U.S. has affected their sales.

This has provided an opportunity for local electric-car rivals, such as BYD Co., NIO Inc. and Xpeng Motors, to work to attract customers to their companies as opposed to Tesla.  

Despite the trade war and declining stock prices having left an overall negative impact on the Chinese car market, new-energy vehicles have not suffered as much by the trend. The China Association of Automobile Manufacturers revealed that sales of these models, which include battery-powered, plug-in hybrid and fuel-cell automobiles, reached 777,000 units last year and have the potential to exceed 1 million in 2018. The government is aiming at selling 7 million vehicles per year by 2025.

The new plant is reportedly being partially funded by loans granted from some of the biggest Chinese banks. RBC Capital Markets analyst Joe Spak said that Tesla may borrow around $1.3 billion locally for its project.