Tesla signs deal to build new Gigafactory in China
Company: Construction to begin in ‘near future’
Tesla announced plans Tuesday to build a new factory in Shanghai that could make 500,000 electric vehicles annually within about five years.
The Palo Alto, California-based automaker signed a deal with the government of Shanghai as CEO Elon Musk visited the city.
Musk had repeatedly said Tesla was close to announcing a new plant in China, where he has said the company would make both electric vehicles and their batteries. At Tesla’s only production facilities now in the U.S., those roles are split with auto assembly in Fremont, California, and battery making at what it calls its “Gigafactory” outside Reno, Nevada.
Tesla said it expects to begin construction “in the near future, after we get all the necessary approvals and permits.”
After that, the company expects it to take about two years to begin making vehicles and another two to three years to reach 500,000 annually.
“Shanghai will be the location for the first Gigafactory outside the United States,” Musk said in a statement. “It will be a state-of-the-art vehicle factory and a role model for sustainability.” Tesla said the overseas expansion would not affect its American manufacturing expansion.
But the long-expected expansion abroad can’t come a moment too soon for Tesla, which is getting hit hard by increased Chinese vehicle tariffs imposed on imported vehicles. Tesla raised prices on cars in China after the trade dispute between President Donald Trump and China prompted the tariff hike from 25 percent to 40 percent.
Manufacturing the vehicles in China would exempt them from those tariffs.
Relief won’t come anytime soon, however. It typically takes at least a few years to construct a new automotive assembly plant from scratch.
The ambitious international growth comes as Tesla has been grappling with how to expand in the near-term at the Fremont plant, under pressure to speed up output of the new Model 3 sedan, its first mass-market electric vehicle.
The company recently took the unusual step of building a tent outside the California factory to add an assembly line in a bid to make vehicles faster.
One positive development for Tesla is that the Chinese government has signaled plans to remove a previous requirement that automakers share technology and profits with Chinese partners through joint ventures.