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Tesla's Breaks Ground on Shanghai Gigafactory

2019-01-28 11:56 Monday


In a milestone event that symbolized its efforts to fully enter the world's largest auto market, Tesla broke ground on January 7, 2019 on its $2 billion Shanghai Gigafactory where it plans to produce Model 3 electric vehicles (EV) by year-end.

Tesla Shanghai Construction Plant

Elon Musk, Tesla's Chief Executive, kicked off the construction of his new Tesla Gigafactory in Shanghai, a project that could help him avoid tariffs on cars initiated as part of the Trump Administration's trade war with China. As China's first wholly foreign-owned car plant, the Gigafactory is a symbol of China's four-decade long economic reforms. Producing cars locally will also help Tesla counteract the impact of the trade war.

Musk gave a speech at the site of the factory, noting:" We think with the resources here we can build the Shanghai Gigafactory in record time and we're looking forward to hopefully having some initial production of the Model 3 towards the end of this year and achieving volume production next year,"

"Affordable cars must be made on same continent as customers," Musk wrote on Twitter ahead of the event.

China raised the import tariff on U.S. cars to 40% in July, and temporarily returned it to 15% as part of a trade war ceasefire, which may end in March, 2019 if US-China trade talks fail.

"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" Musk said in another tweet. "Aiming to finish initial construction this summer," Musk he later added.

According to Tesla's announcement, the Gigafactory, once finished, will assume a 500,000 vehicle per year capacity. Tesla has started hiring staff as well as procuring building materials soon after it secured a site in October. Meanwhile, Tesla has also set up a local financial leasing company.

"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," said Alan Kang, an analyst for consultancy LMC Automotive.

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