Tesla Aims to Begin Electric Vehicle Production in Shanghai By Next Year

Tesla Aims to Begin Electric Vehicle Production in Shanghai By Next Year

Author: FutureCar Staff    

SHANGHAI — Tesla is on a rapid pace to get its Shanghai Gigafactory up and running. The electric automaker has opened a tender process to build its Shanghai Gigafactory and at least one contractor has started buying materials, according to sources and documents reviewed by Reuters.

Tesla is seeking bids from companies to build the plant, according to two people with knowledge of the matter and a construction document on an official local bidding platform. The factory will be located at Lingang near Shanghai's free-trade zone.

The details, previously unreported, reveal that state-owned Shanghai Construction Group is taking part in the bidding process, while a unit of China Minmetals Corp is preparing materials for the plant's foundations.

The two people that spoke to Reuters declined to be identified because the information was not public yet.

Shanghai Baoye Group, a China Minmetals subsidiary, is preparing for the delivery of a large amount of concrete pipe piles and steel pile tips in the second half of December, according to a document on the metals giant's website. These materials are used for building foundations.

An official at Baoye parent China Metallurgical Group Corp, a Minmetals firm, confirmed involvement to Reuters. However, Tesla declined to comment on the construction plans.

The $2 billion factory, Tesla's first in China, is a major bet for the US electric vehicle (EV) maker as it looks to bolster its presence in the world's biggest car market. The factory will eventually have an annual output of 500,000 vehicles. Tesla plans to build the Model 3 at the new plant, as well as the upcoming Model Y compact SUV, which will be built on the same vehicle platform.

Tesla's earnings have been hit hard by increased tariffs on U.S. imports in the growing trade war between the U.S. and China. In response to the tariffs, Tesla raised prices by around 20 percent in China. Building cars locally would allow Tesla to avoid steep tariffs.

Tesla's Gigafactory would also be China's first wholly foreign-owned auto factory. China said in April it would scrap a rule requiring foreign automakers to own no more than 50 percent of any joint venture by 2022, opening the doors to foreign automakers produce cars locally.

Tesla is facing increasing competition in China from domestic automakers that are beginning to introduce cheaper electric models. Chinese automakers are responding to a host of government initiatives to promote the sales of electric vehicles. The Chinese government has offered generous tax incentives and subsidies for car makers and consumers and is building EV charging infrastructure to support the rollout of EVs.

Tesla sales plummeted in China after the government raised tariffs on US-built cars, prompting the carmaker to cut prices to keep its models affordable.

In moves which would further lower prices, Tesla said it aims to produce its Model 3 mass-market car from 2019 at the new plant and localize its manufacturing and supply chain.

Shanghai's Mayor is Pushing to Speed Up Construction

Shanghai's government, in a statement on its official WeChat late on Wednesday, said Mayor Ying Yong had visited the site of the Gigafactory and that preparation work was nearly complete and construction would start soon.

Ying urged the firm to "accelerate" work on the factory and said production would start to some degree in the second half of next year, the statement showed.

A member of the community at Lingang near the plant's 860,000 square meter site said to Reuters that work on ground preparation and fencing appeared nearly complete.

Tesla began manufacturing the Model 3, its first mass-market electric car, in July 2017. The automaker received over 450,000 deposits for the car has been struggling to ramp up production to deliver the car to customers. The lower-priced Model 3 is seen as key for Tesla to remain profitable.

Building a second factory in China should help Tesla keep up with demand, as the automaker looks to break into the world's largest auto market. The new factory will allow Tesla to offer customers in China a more affordable Model 3.

FutureCar Staff
FutureCar Staff
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