Tesla makes Gigafactory 3 in China official, plans to start production in 2 years

Tesla has now confirmed the reports that came out of China this morning about a deal to allow the start of Gigafactory 3 construction in Shanghai.

The automaker confirmed the deal and said that it plans to start construction “in the near future” for the first cars to roll off the line in “2 years.”

Here’s a statement that a Tesla spokesperson sent to Electrek:

“Last year, we announced that we were working with the Shanghai Municipal Government to explore the possibility of establishing a factory in the region to serve the Chinese market. Today, we’ve signed a Cooperative Agreement for Tesla to start building Gigafactory 3, a new electric vehicle manufacturing facility in Shanghai.

We expect construction to begin in the near future after we get all the necessary approvals and permits. From there, it will take roughly two years until we start producing vehicles and then another two to three years before the factory is fully ramped up to produce around 500,000 vehicles per year for Chinese customers. Tesla is deeply committed to the Chinese market, and we look forward to building even more cars for our customers here.

Today’s announcement will not impact our U.S. manufacturing operations, which continue to grow.”

They held a signing ceremony for the agreement with the local government today. Tesla CEO Elon Musk was present along with other Tesla executives:

Musk released a statement following the confirmation that the California-based automaker is going to build its first Gigafactory outside the US:

“Shanghai will be the location for the first Gigafactory outside the United States. It will be a state-of-the-art vehicle factory and a role model for sustainability. We hope it will be completed very soon. We’ve been impressed by the beauty and energy of Shanghai and we want our factory to add to that.”

In a press release, the Shanghai government also announced that there will be a research and development aspect to Tesla’s effort in the region.

Here’s the press release from Shanghai Municipal People’s Government:

Tesla Gigafactory, which aims to build 500,000 electric vehicles per year, has officially settled in Shanghai Lingang Area Development Administration. It is the largest foreign-invested manufacturing project in Shanghai’s history. Today, on July 10th, the Shanghai Municipal People’s Government and Tesla signed a Cooperative Agreement. Mayor Ying Yong and Tesla Chairman and CEO Elon Musk were in attendance to unveil a plaque for the Tesla (Shanghai) Ltd. Electric Vehicle Development and Innovation Center. The agreement was signed by Zhou Bo, Executive Vice Mayor of Shanghai, and Robin Ren, Tesla Vice President for Worldwide Sales.

According to the agreement, both parties will focus their cooperation on jointly promoting technology innovation and industry development, where the city of Shanghai will strongly support Tesla Shanghai. Through this, it is expected that Tesla Shanghai will achieve an optimized R&D, manufacturing, and sales operations that will contribute to its global business. This win-win cooperation further enhances Shanghai’s position as a world class automobile manufacturing center.

Tesla also signed an electric vehicle Investment Agreement with the Lingang Management Committee, Lingang Area Development Administration and the Lingang Group. Tesla plans to construct and operate a wholly-owned Gigafactory in Lingang, this factory will carry out R&D, manufacturing and sales operations. On the same day, the Shanghai Municipal Government and Tesla also unveiled a plaque for the Tesla (Shanghai) Ltd. Electric Vehicle Development and Innovation Center, an important part of Tesla’s global R&D system. The Development and Innovation Center mainly focus on electric vehicle R&D and innovation, and will actively promote the transformation of innovative technology achievements for electric vehicles.

Prior to the signing ceremony, Shanghai Mayor Ying Yong said, “As the biggest economic center at the forefront of reform, Shanghai is accelerating the implementation of the central government’s open policy, working hard to build a new industrial system with modern service industries at its core, led by strategic emerging industries, and supported by advanced manufacturing industries. We are glad to achieve strategic cooperation with Tesla, and we welcome Tesla’s R&D, manufacturing and operations of pure electric cars in Shanghai. The Shanghai Municipal Government will give full support to the construction of Tesla’s factory and strive to create a better environment and provide better services for the development of various enterprises in Shanghai, including Tesla.”

Musk said, “Shanghai will be the location for the first Gigafactory outside the United States. It will be a state-of-the-art vehicle factory and a role model for sustainability. We hope it will be completed very soon. We’ve been impressed by the beauty and energy of Shanghai and we want our factory to add to that.”

Electrek’s Take

In usual Tesla fashion, they are coming out with an insanely aggressive timeline of having vehicles in production at this factory in only two years from the deal being signed.

There’s still no word on how they will finance the factory. Tesla plans to be profitable by the end of the year, which should help fund the factory, but it will undoubtedly be a major investment of at least a few billion dollars.

The capital expenditure will be gradual, but it could put a dent on Tesla’s balance sheet for a while and I wouldn’t be surprised if they go to the market to raise some money for it, like they did for Gigafactory 1.

Financing aside, I am glad that we have something official about a manufacturing facility for Tesla in China since it has been something years in the making.

China is a highly critical market for the electrification of the automotive industry, which Tesla has been a big part of accelerating on the global scale, and now they will accelerate it in China aswell.