Tesla goes big in China with Shanghai plant

China presents a massive growth opportunity for Tesla and rivals such as BMW AG and Daimler AG, which are seeking to take advantage of a massive and fast-growing market for new-energy vehicles.

United States electric-car maker Tesla reached an agreement to build a factory capable of producing 500,000 automobiles per year in Shanghai, the city's government said on Tuesday, July 10.

Tesla and the Shanghai government have reached a preliminary agreement to establish a Tesla factory over there. Tesla can start to produce and provide its vehicles for the Chinese market while Shanghai will benefit from thousands of new jobs, local companies receiving new orders from Tesla, and a general boost to the local economy any major business investment brings.

Chief Executive Officer Elon Musk sealed a crucial agreement Tuesday to start building its second auto assembly plant in the world. A Tesla representative in China didn't immediately respond to a request for comment.

The Shanghai city government announced the news on its WeChat channel, and said that the factory aims to produce as many as 500,000 vehicles per year once it is fully up and running. More than two years after the first reservations were taken for the least expensive Tesla auto, Elektrek reports the Model 3 design studio should be available to everyone starting on Tuesday.

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 USA imports, including cars, subjected to retaliatory tariffs of 25 percent.

While Musk, 47, said in May 2016 that he expected Tesla would produce 500,000 vehicles a year by 2018, the company has repeatedly fallen short of his manufacturing goals with the Model 3 sedan.

Tesla CEO Elon Musk was in Shanghai Tuesday to appear in a joint announcement with the city government.

Tesla will be allowing people in the USA and Canada to bypass a reservation process for the Model 3, according to a report. After China announced in May that it planned to scrap by 2022 the rules on capping foreign ownership of new-energy vehicle ventures, Tesla registered a new electric auto firm in Shanghai.

"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". China accounted for 17 per cent of Tesla's revenue for 2017, according a filing with US regulators.

BMW exported about 81,000 cars from a plant in SC to China a year ago, generating about $2.4 billion in sales. Electrek also says stores will get Performance Model 3 vehicles by the end of the month. "Tesla is deeply committed to the Chinese market, and we look forward to building even more cars for our customers here".

China has emerged in recent years as the world's largest market for electric vehicles.

  • David Armstrong