Tesla to open plant in Shanghai with annual capacity of 500,000 cars

Marcus Newton
July 11, 2018

It said vehicle production there should begin about two years later, and that it should then be another two to three years after that for the plant to reach its 500,000 annual car-production capacity.

Tesla chief executive Elon Musk will meet with Chinese officialsBeijingnghai and Baijing this week.

Tesla did not immediately respond to requests for comment. The facility is slated to be Tesla's biggest outside of its factory in Fremont.

Tesla shares extended their advance before the start of regular trading to gain as much as 3.4 per cent.

The Associated Press reports this announcement comes on the heels of growing trade tension between the USA and China, and Beijing's decision to stop restrictions on requiring outside automakers to work through locally-based joint ventures.

When it added a second assembly line to produce more Model 3s, the company constructed a giant tent running out from the Fremont factory to produce more cars.

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CNET reports that the tensions between the USA and China caused the electric auto maker to raise the prices on its Model S and Model X vehicles. It said production would begin two to three years after that and eventually increase to 500,000 vehicles annually.

Global automaker Daimler (DDAIF) warned last month that the new Chinese tariffs would hit its profits, resulting in "fewer than expected SUV sales and higher than expected costs", which won't be completely passed on to customers.

"According to the agreement, both parties will focus their cooperation on jointly promoting technology innovation and industry development, where the city of Shanghai will strongly support Tesla Shanghai", says a translated press release from the Shanghai Municipal People's Government provided to The Drive by Tesla.

In response to the 25 per cent tariff the US implemented on $34 billion worth of Chinese imports, the Asian superpower bumped its tariff on electric cars from 15 per cent to 40 per cent. A plant in China also reduces shipping costs and potentially makes sourcing components more economical. China until recently levied 25-percent tariffs on imported cars, and for decades automakers have been moving to build more vehicles in the markets where they will be sold to neutralize the risk of currency shifts and trade policy reversals. However, in May, China said it would do away with such ownership rules by 2022.

Tesla hiked prices in China over the weekend to a level more than 70 percent higher than in the United States amid mounting trade frictions between Washington and Beijing that have seen several US imports, including cars, subjected to retaliatory tariffs of 25 percent.

Previous reports uncovered that a new business licence has been approved for a company registered by Tesla's set-up in Hong Kong. That category, which includes battery-powered, plug-in hybrid and fuel-cell automobiles, reached 777,000 units last year and could surpass 1 million this year, according to estimates by the China Association of Automobile Manufacturers. The government's target is 7 million vehicles a year by 2025. That gave it about 3 per cent of the nation's battery-powered electric-vehicle market, placing it as the No. 10 brand in that segment. That level would be more than double the current USA market, where new light vehicle sales run at about 17 million vehicles a year.

Other reports by MaliBehiribAe

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