Elon Musk and Tesla begin work on ambitious Shanghai factory

7 Jan 2019

Tesla Motors showroom. Image: ifeelstock/Depositphotos

Elon Musk breaks ground on Tesla’s first non-US factory.

Tesla CEO Elon Musk today (7 January) celebrated breaking ground on the car manufacturer’s first factory facility outside of the US, in the Chinese city of Shanghai. The city’s mayor, Ying Yong, was also present at the event.

The factory site is in the Lingang district in south-east Shanghai. Shanghai government authorities say that the venture is the largest foreign investment in the city to date.

Chinese demand for electric vehicles is high

Musk had announced plans to build the Gigafactory facility in China last July. The country is fast emerging as the largest electric vehicle (EV) market in the world and Tesla is set to take advantage of this, despite continued trade tensions between the US and China. According to Bloomberg, China is responsible for approximately 37pc of passenger EVs sold around the world since 2011.

Ongoing trade difficulties between China and the US have seen Tesla adjust the prices of its US-made vehicles in China. It is hoped that the Shanghai facility will allow Tesla to minimise the impact of the trade issues and help combat competitors. A reduction in tariffs and ocean transport would also be a welcome boost for the company.

Musk stated the initial construction of the facility will be complete by the summer of this year, with Model 3 vehicle production set to begin at the end of 2019, reaching “high volume production next year [2020]”. The company previously opened Model 3 pre-orders for customers based in China in November of 2018.

Tesla ironed out some logistics problems

According to Statista data, Tesla vehicle production rallied in the second half of last year, following some delivery logistics issues. Despite the recovery later in the year, the company still missed its target of 92,000 delivered vehicles, albeit by fewer than 2,000 units.

A bar chart displaying the amount of vehicles Tesla produced in 2016, 2017 and 2018.

Tesla production rates. Infographic: Statista

The company has established official accounts on Chinese social media and messaging platforms Weibo and WeChat, where more than 30 openings for jobs at the Shanghai facility are listed.

In a statement, the company said the new factory will “allow Tesla to localise production of Model 3 and future models sold in China, with plans to eventually produce approximately 3,000 Model 3 vehicles per week in the initial phase and to ramp up to 500,000 vehicles per year when fully operational (subject to local factors including regulatory approval and supply chain constraints)”.

Musk also clarified that the US facilities will continue to produce vehicles for the US and other markets, while the Shanghai Gigafactory facility will be solely for Chinese consumers.

Tesla Motors showroom. Image: ifeelstock/Depositphotos

Ellen Tannam was a journalist with Silicon Republic, covering all manner of business and tech subjects