Tesla Acquires Shanghai Site for Gigafactory 3

Tesla Inc. on Wednesday has secured the acquisition of an 864,885 square meter plot in Shanghai’s Lingang area where the electric car maker intends to build its first overseas Gigafactory.

The deal, which was first announced in July, is expected to double the size of Tesla’s global production.       

Securing this site in Shanghai, Tesla’s first Gigafactory outside of the US, is an important milestone for what will be our next advanced, sustainably developed manufacturing site, said Robin Ren, Tesla’s vice president of worldwide sales.

Shares of Tesla fell 0.5 percent to $275.05 on Wednesday.

Resolving Tesla’s Costs Issue

The deal marks a key step towards Tesla and its Chief Executive Elon Musk building automobiles locally in China for the rapidly growing market, even as tariffs employed by Beijing on US-made goods have urged it to raise prices of its imported models.

Recent changes in import duties for foreign vehicles in China, the world’s largest market for electric vehicles, are strongly affecting the firm in the country – prompting Tesla to build its local manufacturing capacity.   

Being able to produce cars in China would considerably reduce costs for Tesla.

The Palo Alto-based company noted in an October report that it was unable to access the same cash incentives as local Chinese manufacturers, and overall shipping costs and tariffs mean Tesla is operating at a 55 percent to 60 percent cost disadvantage compared with a domestic counterpart.

To address the issue, Tesla was pushed to accelerate the establishment of the Shanghai factory.

Successfully acquiring the plot for the vehicle factory, Tesla is now on track with the new plan.

An earnings report released in August stated that the firm expects the wholly-owned Gigafactory 3 to manufacture its first vehicles in three years. The facility will accommodate about 250,000 cars and battery packs a year at the start and will eventually double.

Tesla signed an agreement with Shanghai authorities in July to set up a production plant in China’s biggest city with an annual capacity of $500,000 vehicles.

The automaker did not specify the price for the plot, but a piece of land of that size had been sold at an auction for a price of CN¥973 million ($140.51 million), according to the Shanghai Bureau of Planning and Land Resources.

Tesla said funding for construction, which will cost around $2 billion, will mainly come from Asian debt markets and its own investment, and will not begin in any significant way until next year.

HQBroker is here to give you a daily news roundup about the forex, commodities, technologies, automobiles, and economies. You can open an account now and make yourself updated with essential news in the market. Share your thoughts and experiences with us by commenting your HQBroker reviews.