Elon Musk breaks ground on first Tesla factory outside US

Matthew DeBord  Business Insider

Matthew DeBord Business Insider

In a series of tweets on Monday, Mr Musk said plant would build "affordable versions" of the Tesla Model 3 - the carmaker's mass market vehicle - and its proposed Model Y for the Greater China region.

Tesla's next model, the Model Y small SUV, was originally slated to go into production in 2019, but the company now has no factory space to produce it.

China raised the import tariff on United States cars to 40% in July, then cut it to 15% from the start of this year as part of a trade war truce.

Tesla has been pushing forward its plans for the plant after it secured the site in October, hiring staff, starting procurement for building materials and setting up a financial leasing company in the city.

The electric automaker purchased the site past year for roughly $140,000 and intends on building the 860,000-square-meter site far quicker than is typical of automotive factories, Forbes reports.

Higher-priced models will be built in the USA for export to China, he said.

Aiming at reinforcing its presence in the world's largest market for electric cars, Tesla brought its Model S, Model X and Model 3 to the China International Import Expo held in November 2018 at Shanghai.

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Tesla was the first foreign auto maker to take advantage of a recent rule change allowing foreigners to own their China business, instead of having to work with Chinese partners as previously required.

Producing vehicles in China could reduce Tesla's costs of tariffs and ocean transport for Tesla which, the company said in October, burdened it with a cost disadvantage of 55 to 60 percent.

Elon Musk has attended the ground-breaking ceremony for a $2bn (£1.6bn) Tesla factory in Shanghai that is expected to begin producing electric cars by the end of the year. And the competition is getting more and more fierce, ' said Alan Kang, Shanghai-based analyst for consultancy LMC Automotive. Tesla has said it intends to produce up to 500,000 cars a year at the 210-acre facility within a decade.

"With the resources here, I think we can build the Shanghai Gigafactory in a record time", Musk said.

Shares in Chinese suppliers to Tesla, including Tianjin Motor Dies Co Ltd and VT Industrial Technology Co Ltd, rallied on Monday after Musk's tweets. As a matter of fact, Musk revealed on Twitter that the first stage of production at the site should be completed by the second half of 2019.

China is the largest market for electric vehicles, and most forecasters predict EV sales in the country will accelerate rapidly as the government drives toward a goal of 100 per cent electric vehicles by 2030.

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