After all the recent rumors that Tesla reached a deal with China to build a ‘wholly-owned’ factory in Shanghai, CEO Elon Musk officially elaborated on the automaker’s plan to establish manufacturing capacity in China.
During a conference call discussing Tesla’s third quarter financial results, Musk confirmed that the company aims to start producing cars in the Chinese market in “about 3 years.”
Tesla currently only builds vehicles in California and performs some final assembly in the Netherlands, but no other full car factory has so far been announced by the company.
But Musk has been saying for about a year now that the company is looking for several more locations to build Gigafactories to produce both batteries and electric vehicles in Europe and in China.
A 3-year timeline would mean a start of production in 2020.
As for when they will start to build that factory, Musk didn’t elaborate beyond confirming to an analyst that he expects that Tesla will start to ramp up its investments in China in 2019.
The CEO also commented on the potential production capacity of the factory:
“I mean, it’s something in the hundreds of thousands of vehicles per year. I’m not sure where it is exactly, but it’s at least a couple of hundred thousand vehicles a year, maybe more.”
Musk only talked vehicle production and not about battery production. He previously mentioned having both at the same location for future factories.
He did also say that they would only build Model 3, and potentially Model Y, at the upcoming Chinese factory to support local demand and maybe demand from neighboring countries, but they wouldn’t produce Model S or Model X in China.
Tesla’s vehicles in China are currently slapped with a 25% import duty because they are imported from the US.
The goal behind establishing production in the country is believed to be in order to remove this restriction and also reduce logistical costs related to shipping large numbers of vehicles to another continent.
Despite its current limitations, Tesla has grown significantly in China, which is already the biggest market for electric vehicles, or any vehicle for that matter. The company profited from the demand by tripling its sales to over $1 billion in the country in 2016.
Tesla continues to have strong sales in the country this year, where it leads foreign electric car sales with no close second.
But now further growth is expected to be limited until Tesla can bring the Model 3 to the Chinese market and produce car locally.
We now have what Musk describes as a “rough target” of about 3 years for when that will happen.