Tesla will break ground for its Shanghai gigafactory where it will begin making Model 3 electric vehicles by year-end, chief executive Elon Musk tweeted ahead of the formal start of construction of the firm's first Chinese plant.
The $2 billion (€1.74bn) factory – long under discussion – marks a major bet by the US electric vehicle maker as it looks to bolster its presence in the world’s biggest auto market, where it faces rising competition from a swathe of domestic rivals and its sales have been hit by increased tariffs on US imports.
“Looking forward to breaking ground on the @Tesla Shanghai Gigafactory today!” Musk wrote in a post on Twitter. Musk has said previously he would attend the event in Shanghai.
Tesla officials in China declined to comment. The carmaker, which currently 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 sales have been strong.
China raised the import tariff on US-made cars to 40 per cent in July, but cut it back to 15 per cent from the start of this year as part of a ceasefire in a trade war with the US. The lower tariff will last until the end of March pending trade talks.
Local rivals
A local plant will help Tesla lower prices in the market to compete with a new generation of local rivals including Nio Inc , Byton and XPeng Motors.
“Affordable cars must be made on same continent as customers,” Musk said in another tweet. “Shanghai Giga will produce affordable versions of 3/Y for greater China. All Model S/X & higher cost versions of Model 3/Y will still be built in US for WW market, incl China,” he later added, referring to the worldwide market including China.
Alan Kang, a Shanghai-based analyst for consultancy LMC Automotive, said: "Tesla's sales [in China] have dropped over the past few months because of high price caused by the tariffs. And the competition is getting more and more fierce.With the construction of the Shanghai factory, the faster the better [for Tesla]." – Reuters