Mr. Musk Goes to China, Vehicles to Pour Forth

Steph Willems
by Steph Willems
mr musk goes to china vehicles to pour forth

Tesla’s sole assembly plant in Fremont, California won’t be lonely for long. A preliminary deal reached between the automaker and the government of Shanghai could see a new assembly plant start production in about three years’ time. The Chinese plant would most likely build Model 3s and upcoming Model Y crossovers, Bloomberg reports.

Assuming Tesla can scrounge up the $4 to $5 billion needed to complete construction of the facility (a Goldman Sachs estimate), the plant could produce up to 500,000 vehicles per year. And it just so happens that Shanghai has a free trade zone.

This morning’s news was foreshadowed when a new Tesla subsidiary popped up in that city in May. Musk travelled to China on Tuesday, stopping near a cave in another country on the way.

Shanghai is an increasingly attractive target for foreign automakers, especially since the Trump administration launched a series of trade tariffs at China. The People’s Republic, which already levied import duties on foreign-made cars, but had promised to lower them, hiked its tariffs back up in retaliation. China’s tariff on U.S. vehicles now stands at 40 percent.

By manufacturing in-country with the help of local suppliers, Tesla can side-step the duties that forced it to raise sticker prices by up to 75 percent compared to the U.S. market. Relatively low-priced vehicle like the Model 3 and Model Y (a vehicle whose price point is unknown, but surely lower than the Model X SUV) are a shoo-in for the China factory. Fremont can handle the Model S and X duties.

While Tesla expects to be cash-positive by the end of the year, the assembly plant’s price tag worries some investors. It’s possible Shanghai might help in that regard.

“The Shanghai municipal government will fully support the construction of the Tesla factory,” said the Shanghai Municipal People’s Government in a statement printed by Reuters.

In the past, Tesla argued against China’s policy of requiring foreign automakers to partner 50-50 with a local manufacturer, but the country has since announced an end to that practice. The mandate should run its course by 2022 — roughly the same time as the plant’s opening. With the threat of technology theft lessened, Tesla claims it plans to invest in R&D at its Shanghai facility.

[Image: Maurizio Pesce/ Flickr ( CC BY 2.0)]

Join the conversation
3 of 18 comments
  • Cicero1 Cicero1 on Jul 10, 2018

    Three years, so in Tesla time around 2075.

  • Art Vandelay Art Vandelay on Jul 10, 2018

    I ask snark intended, but is Tesla being cash positive by the end of the year a real possibility or Musk being Musk here? Also, if so has there been any word on an updated model S? The design has changed little since 2011. If the company is turning a corner and looks viable I'd add the S to my list of vehicles I'll look at in a couple years, however I've heard of nothing new in the pipeline and it will be 9 years old with only a minor refresh at that point. I'd like to see it get an interior more fitting of something in that range.

    • Mike978 Mike978 on Jul 10, 2018

      I would expect in typical Tesla fashion that it will be about $100 cash positive after pulling out all the stops like charging $2500 for orders that get built in January 2019 etc.

  • ToolGuy VW (marque not group) and Tesla very nearly switched positions on a YTD basis.
  • RHD Inexpensive gasoline appears to be a thing of the past. ILO is correct - we have enough sunlight, wind and emerging ocean wave energy to power the entire country and then some. Clean air is nice, and being free of the whims of OPEC, geopolitics and hugely profitable oil companies will do all of us a world of good.
  • Raymond Segura Can you tell me where I can get the rear bumper for 69 impala?
  • Art Vandelay some of the crazy numbers I get. Percentages look bigger with any fluctuations with low volume makes and brands leaving the market will see massive month over month changes. But what’s with Buick? I still see the occasional ad on TV and yet the drop is disproportionate even compared to all the other GM brands.
  • Master Baiter "There is no mandate for consumers to buy EVs, not in any country or state. That’s made up."Right. And you are not mandated to purchase a toilet that only uses 1.6 gallons/flush. You could choose to not have a toilet--just go in the woods, like the bears do.