Elon Musk starts work on his $2billion Tesla ‘Gigafactory’ in China

Matthew DeBord  Business Insider

Matthew DeBord Business Insider

On Twitter, he explained that his company's new "Gigafactory" would be focused on producing Tesla's most affordable models, the Model 3 and the yet-to-be-revealed Model Y, for sale in Greater China.

Tesla's US-made cars are now subject to a 15 per cent tariff in the mainland after Beijing rolled back an extra 25 per cent tariff it slapped on USA auto imports for three months from January 1. In this light, Tesla appears set to kick off 2019 on a strong note, starting the first week of the year with more than 14,000 Model 3 VIN registrations - over 9,000 of which are cars for the European market.

The plant, which is Tesla's first outside the USA, is located at Lingang, a high-end manufacturing park in the southeast harbour of Shanghai.

The Shanghai government last month said mayor Ying Yong had visited the site and urged Tesla to "accelerate" work on the factory.

Tesla boss Elon Musk presided Monday over the ground-breaking for a Shanghai factory that will allow the electric-car manufacturer to dodge the China-US tariff crossfire and sell directly to the world's biggest market for "green" vehicles.

The Shanghai venture comes as USA companies face pressure from President Donald Trump to keep manufacturing jobs at home, and as Beijing and Washington wage a trade spat that has seen both sides levy tariffs on hundreds of billions of dollars of products.

But the drop in the sales isn't just a direct effect of the trade war, which is why Monday's groundbreaking comes at an uncertain time. China remains the world's largest market for vehicles, particularly green ones.

China accounts for about 35 percent of all global electric vehicle sales. A key China PMI index fell below 50 in December to its lowest reading since May 2017, signaling weakening demand in the $12.2 trillion economy.

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

It has an annual production capacity of 500,000 electric cars.

Elon Musk says the company is aiming to have the construction of the $2 billion factory finished this summer with the initial production models rolling off the lines by the end of the year before volume production ramps up in 2020. He provided no price figures for China-made cars.

A fully owned facility also would mean Tesla won't need to share its profits and technology with Chinese partners, unlike other foreign carmakers who are required to form a domestic joint venture.

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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