Tesla has confirmed the reports coming out of China about the deal that will start the construction of a Gigafactory in Shanghai. The factory will reportedly produce 500,000 units a year.
In typical Tesla fashion, they expect to start production in only 2 years following the start of the construction of the factory.
Tesla CEO Elon Musk had the following statement:
“Shanghai will be the location for the first Gigafactory outside the United States. It will be a state-of-the-art vehicle factory and a role model for sustainability. We hope it will be completed very soon. We’ve been impressed by the beauty and energy of Shanghai and we want our factory to add to that.”
This upcoming Gigafactory will be great for Tesla to get a foothold in the world’s largest market for electric cars. Especially with the recent trade war that has been going on that has caused Tesla to raise the prices of its Model S and Model X over $20,000.
With a factory in China Tesla will be able to bypass China’s current steep tariffs. Musk has also stated that having a factory in China is pretty much the only way they can compete with the lower prices of local electric car manufacturers such as BYD.
The factory will most likely produce the Model Y crossover SUV which is estimated to have a demand of up to 1 million units a year. Musk noted that some of the Model 3 could also be produced in China.
There is no word on how much the Gigafactory will cost. Tesla plans to be profitable by the end of this year, but this might make that plan a bit difficult as this will have to be a major investment of at least a few billion dollars.
The funding aside this will be a huge help for Tesla in China. The Model S and Model X are seen as luxury status symbols, but obviously they don’t reach the lower classes. With the Model 3 and Model Y being cheaper cars (and avoiding any tariffs) Tesla will reach a larger part of the market for electric cars in China.
Source: Tech Crunch