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

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The move could help cement the brand in China and circumvent steep tariffs on the cars.

Tesla sold 14,779 vehicles in China previous year, according to data from LMC Automotive. Amidst the overwhelming number of reservations it received for the Model 3, Tesla embarked on what could be called an "anti-selling" period for the Model 3, with Elon Musk highlighting the car's extended wait time and comparing the Model S favorably against the vehicle.

The automaker has reached a preliminary agreement with the government of Shanghai - the city is an automaker hub - to build a factory with a capacity to produce 500,000 vehicles a year, Bloomberg reports.

China is an extremely important market for Tesla.

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

The memorandum of understanding is a major development in a more-than-yearlong effort by Tesla to open China's first production facility to be wholly owned by a foreign carmaker.

Tesla didn't respond to a request for comment on the price rises.

But Tesla and producers including GM and Nissan Motor Co. had been reluctant to transfer manufacturing to the country due to the requirement to share technology with Chinese partners that might become rivals. More than two years after the first reservations were taken for the least expensive Tesla vehicle, Elektrek reports the Model 3 design studio should be available to everyone starting on Tuesday.

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It said Shanghai would provide full support to Tesla in a project combing manufacturing, research and development, and sales and aimed at super-charging electric-vehicle development in the city.

Tesla plans to producing the first cars about two years after construction begins on its Shanghai factory, ramping up to as many as 500,000 vehicles a year about two to three years after that, the company said.

In the meantime, Tesla has reportedly hiked its prices for imported vehicles in China to offset costs of increasing tariffs.

But the latest retaliatory tariffs mean importers will have to fork out a total 40 percent duty on all USA -made cars they sell in China. That was more than double the USA level of just under 200,000.

Musk had previously criticized China's tough auto rules for foreign businesses, which would have required it to cede a 50-percent share in the factory. 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 are sold to neutralize currency shifts and trade policy reversals.

But it registered a new electric auto firm in Shanghai in May after China announced that it planned to scrap rules on capping foreign ownership of new-energy vehicle (NEV) ventures by 2022. Work toward getting the factory built has gained urgency as Donald Trump engages in a trade war that's ensnared imports of the company's vehicles into China.

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

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