Published: Tue, January 08, 2019
Business | By Eloise Houston

Elon Musk Says Tesla is Breaking Ground on Shanghai Gigafactory

Elon Musk Says Tesla is Breaking Ground on Shanghai Gigafactory

Tesla (TSLA) bought the land for the factory outside Shanghai in October for $140 million.

Tesla plans to produce its Model 3 and Model Y cars in the initial phase of production at the Shanghai plant, with an annual capacity of 250,000 vehicles.

Cheaper Model 3 versions will be produced in Shanghai for the Chinese market amid a pinched auto market and Chinese automakers such as BYD and Geely building their own electric vehicles.

As the company's troubled ramp-up of existing Model 3 production showed, Tesla is in dire need of more manufacturing space than the Fremont factory affords.

"Aiming to finish initial construction this summer, start Model 3 production end of year & reach high volume production next year", Musk tweeted.

"Looking forward to breaking ground on the @Tesla Shanghai Gigafactory today!" said Musk on Twitter.

China is the world's largest auto and NEV market, with Beijing aspiring to become the global NEV leader with technologies that meet the highest worldwide standards by 2025.

Elon Musk joined the mayor of Shanghai on Monday for the groundbreaking ceremony of Tesla's first factory outside the USA and in the world's largest electric vehicle (EV) market, China.

The so-called Gigafactory would also be China's first wholly foreign-owned vehicle plant, a reflection of China's broader shift to open up its auto market even amid a whipsawing trade war between Washington and Beijing.

Domestic production would help shield Tesla against import duties as the USA and China find ways to wriggle out of the tariff quandary. China remains the world's largest market for vehicles, particularly green ones.

Tesla, based on Palo Alto, California, global automakers including General Motors Co., Volkswagen AG and Nissan Motor Corp. that are pouring billions of dollars into manufacturing electric vehicles in China.

But the pace of growth is expected to slow along with China's economy.

"Shanghai Giga production of Model 3/Y will serve greater China region... not North America".

Despite its relative affordability compared to other Tesla models, the price of a US-made Model 3 now starts at about $50,000, but Musk has said he aims to get that down to $35,000. He said higher-priced models will be built in the United States. He provided no price figures for China-made cars.

The American automaker faces rising competition from local rivals in China.

Tesla has yet to give a price tag but the Shanghai government said it would be the biggest foreign investment there to date.

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