Tesla Shanghai factory construction started
Forecasted to build half a million units per year, Tesla’s Shanghai factory is now officially under construction. The first Model 3 EVs are supposed to start rolling out of the production lines by end of 2018.
Tesla will be producing affordable versions of the Model 3 as well as the future Model Y, designed and developed especially for the Chinese market. The high-end versions will continue to be produced in the US. Musk tweeted: "Affordable cars must be made on same continent as customers."
By producing locally, Tesla will soon be able to avoid the wild pricing fluctuations the brand had to undergo in 2018. As a result of Trump’s trade war, the company had to absorb significant price increases in favour of the Chinese customer.
Tesla took hits from about USD 10,000 for each Model S sold on the Chinese market (782,900 yuan or $113,000, down from 849,900 yuan or $122,525), up to over USD 50,000 on high end Model X (from 1.57 million yuan or $227,000 to around 1.2 million yuan or $171,000).
Tesla’s imported Model 3 will start at a price of 540,000 yuan ($78,000). The price of the locally produced base Model 3 or the future Model Y are not yet communicated.
The decision to produce in China makes sense, regardless of the USD 2 billion price tag of the Megafactory. Even if the Chinese economy is slowing down, growth is still significant and the new middle class wants to buy cars. Chinese Government has made it very clear that combustion engines are no longer welcome in China, making the world’s second economy already the largest EV market on the globe.
This matches with Tesla’s strategy. Especially the car sharing features that have been uploaded to its vehicles in an 2018 software update, contain ingredients for success. China is working hard to make its megacities more liveable by limiting the number of license plate registrations; Tesla car sharing might become a success.
Locals however were surprised to see Tesla opting in for a Shanghai location, rather than the cheaper places where most other OEMs have built their manufacturing units.