Tesla on Wednesday secured a 860,000 square metre piece of land in Shanghai, in another step towards building its first plant outside the United States.
The California-based company agreed to pay 973 million yuan (US$140.6 million) for the land in Lingang, near Shanghai’s free-trade zone, according to the Shanghai Bureau of Planning and Land Resources.
The company’s planned Gigafactory 3 has been designed to have a capacity of 500,000 vehicles.
The signing of the agreement for the land comes three months after Tesla announced it would establish a factory in Shanghai with an investment of US$5 billion. Its chief executive, Elon Musk, said in August Tesla expected to invest US$2 billion initially to produce 250,000 electric cars at the Shanghai-based plant, which is likely to be operational in two years.
“Securing this site in Shanghai, Tesla’s first Gigafactory outside the United States, 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.
Securing this site in Shanghai, Tesla’s first Gigafactory outside the United States, is an important milestone
Robin Ren, vice-president of worldwide sales, Tesla
The company said it was accelerating the construction of the factory, and expected it to be capital-efficient with a rapid build out after learning “many lessons” from the launch of its Model 3 in North America.
Tesla’s investment in China, the world’s largest car market, can help it effectively dodge import duties levied on foreign-made vehicles in China, which can be as high as 40 per cent.
In July, Tesla announced it would raise prices by about 20 per cent for models sold in mainland China, after Beijing slapped a 25 per cent punitive tariff on American-made automobiles amid its escalating trade war with Washington.
Ford Motors also has plans to ramp up its mainland production capabilities for the launch of new models such as the Territory SUV, and a range of electric cars, as it works around trade war levies.
Beijing wants to become the world leader in new-energy vehicles, with technologies that meet the highest international standards, by 2025. It hopes China’s home-grown carmakers will sell three million electric vehicles by that time.
Tesla raises prices in China by 20pc, adding US$21,000 to the cost of a Model S after Beijing rolls out counter tariffs
China’s new-energy vehicle segment has been a bright spot this year amid a slowing market, which is expected to report a drop in sales for the first time in 26 years. For the first nine months of this year, new-energy vehicle sales across mainland China jumped by 81.1 per cent from a year ago to 721,000 units.
The overall car market in China posted a sales growth of 1.49 per cent in the same period after an 11.6 per cent year-on-year decline in September.
In 2017, Tesla sold 17,160 units on the mainland, representing 2.2 per cent of all electric vehicles sold in China
This article appeared in the South China Morning Post print edition as: Tesla closer to Shanghai factory ambition with 973m yuan land deal