Tesla starts work on its Shanghai Gigafactory

Tesla starts work on its Shanghai Gigafactory

Tesla boss Elon Musk said the electric car-maker would break ground Monday on a Shanghai factory that will allow it to sell to Chinese consumers and avoid tariffs from the China-US trade war.

Musk said the Shanghai plant would supply the "Greater China region" with "affordable versions" of the Tesla Model 3 - the automaker's first mid-price, mass-market vehicle - and its planned Model Y.

But the drop in the sales isn't just a direct effect of the trade war, which is why Monday's groundbreaking comes at an uncertain time.

Tesla Inc. (NASDAQ: TSLA) has officially broken ground on a new $5-billion US factory in China, the world's largest automotive market. The U.S. Securities and Exchange Commission moved to punish Tesla previous year after his infamous "funding secured" tweet, with fines and a settlement that required corporate governance reforms.

The carmaker, which now imports US-made vehicles to sell in China, is building the plant in an auto market that is set to contract this year for the first time in decades, though so-called new-energy vehicle (NEV) sales have been strong.

"With the construction of the Shanghai factory, the faster the better [for Tesla]".

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"China is becoming the global leader in electric vehicle adoption, and it is a market that is critical to Tesla's mission to accelerate the world's transition to sustainable energy", Musk commented.

A fully owned facility in China means that Tesla doesn't need to share its profits and technology with Chinese partners, unlike other foreign carmakers who are required by the government in Beijing to form a domestic joint venture.

Higher-priced models will be built in the U.S. for export to China, he said. With these latest filings, Tesla had also broken the 200k barrier with its Model 3 VIN registrations - a notable milestone for a vehicle whose production was beset by challenges on its first year. Apple triggered global equity losses last week when it said slackening Chinese demand spurred it to cut its revenue outlook for the first time in nearly two decades.

The company's well-documented production troubles with the Model 3 have led to heavy investment in the company's US Gigafactory to quell "production bottlenecks" and reach delivery targets for the entry-level model. He provided no price figures for China-made cars.

Tesla secured the site for its 500,000 vehicle capacity plant in October and has already begun hiring staff and starting procurement for building materials.

At the time, Tesla said the costs that go into its cars are roughly 55% to 60% higher than for local firms, when tariffs and sea transport costs are take into account.

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