Economy

Tesla CEO Musk breaks ground at Shanghai Gigafactory to launch China push

Tesla CEO Musk breaks ground at Shanghai Gigafactory to launch China push”

"With the construction of the Shanghai factory, the faster the better [for Tesla]".

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.

The Shanghai Gigafactory is significant not just because it's Tesla's first fully owned factory in China, but because it is the first wholly foreign-owned auto plant of any overseas vehicle manufacturer in China.

The country's auto market is expected to have shrunk previous year for the first time in decades but demand for electric vehicles remains strong.

Musk added that initial construction on the factory is scheduled to wrap up this summer with Model 3 production beginning by the end of the year and "high volume production" kicked into gear in the following year.

"It makes sense for Tesla to commit fully to becoming a leading EV brand in the world's largest EV market", said Bill Russo, chief executive of Shanghai-based consulting firm Automobility.

In China, the billionaire-entrepreneur faces a vehicle market that probably shrank a year ago for the first time in at least two decades as uncertainties surrounding the trade fight between the world's two biggest economies, signs of weakening domestic demand and a stock-market slump take their toll on consumers.

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

Musk and Shanghai Mayor Ying Yong led Monday's ground-breaking event. The two sides have called a truce in their trade fight and are engaged in talks to cool tensions, with China temporarily scrapping a retaliatory 25 percent tariff on US -made cars starting January 1.

Tesla has said it aims to produce its Model 3 mass-market vehicle from 2019 at the new plant. The new factory will help meet global targets on Tesla Model 3 production.

Domestic and foreign automakers have been racing to grab shares of China's electric-vehicle sector - already the world's biggest and expected to continue to grow as the Chinese government pushes clean technologies. 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.

Model 3, for example, which starts at a price of Dollars 35,000 in the U.S. market, is sold between 500,000 yuan and 560,000 yuan (around USD 72,980 and USD 81,738) in China.

China has raised import duties on US-made cars as part of the broader trade fight with the US.

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

But Tesla has said its Shanghai plant will be "wholly-owned" by the company.



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