Tesla inks China giga-factory deal, targets 500,000 EVs a year

Just days after scrabbling to meet its much delayed goal of 5,000 Model 3 sedans a week, Tesla has announced plans to build a massive car plant in China that would be capable of producing 500,000 electric vehicles a year.

The US automaker said on Tuesday it had reached an agreement with Chinese authorities to build the factory in Shanghai, marking its first manufacturing foray outside of America.

Tesla said it expected to begin construction of the wholly-owned facility as soon as the necessary approvals and permits were locked in.

“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,” the company said in a statement.

The announcement – which Bloomberg reports is notably absent any detail on cost – comes as the company continues to burn through cash and graduate from numerous levels of production hell at its US battery and car plants.

Elon Musk had forecast that the company’s Fremont California plant would be turning out 500,000 cars a year by 2018, but it has so far produced a total of just 90,000 at the half-way mark.

But even in light of these facts, and without any detail on how such a project might be bankrolled, the market seems to be buoyed by the news, pushing the Tesla stock price up by $US6 at close of trade on Tuesday.

The China news – the Twitterati has noted a version of the Shanghai deal was reported by the Wall Street Journal in October last year – has also been linked with the current trade war that’s brewing between China and the US.

Tesla – which says the trade war has had no bearing on the deal – has had to raise prices on the cars it sells in China to offset the cost of new tariffs imposed by the Chinese government in reply to President Trump’s heavier duties on Chinese goods.

Even before the new tariffs, Musk had compared trying to sell cars in China under its trade rules to “competing in an Olympic race wearing lead shoes.”

Needless to say, China – which is the world’s largest market for cars, and is among the world’s leaders in the shift to EVs – will be a hugely important market for Tesla.

According to data cited in Bloomberg, Tesla sold 14,779 vehicles in China in 2017, accounting for about 3 per cent of the nation’s battery-powered EV market, and putting it at 10 brand in that segment.

“Tesla is deeply committed to the Chinese market, and we look forward to building even more cars for our customers here,” the company said in its emailed statement.