Tesla confirmed plans to build a Gigafactory in China last month after reaching a preliminary deal with the local Shanghai government, but it didn’t disclose how much it is expected to cost or how they will pay for it.
A new report now claims that Tesla expects Gigafactory 3 in China to cost $5 billion.
The report is coming from Bloomberg based on an anonymous source who also says that Tesla is looking for a local partner to invest:
“The electric-car pioneer is considering raising some of the $5 billion it intends to invest in the plant near Shanghai from local partners, according to a person familiar with the plans, who asked not to be identified as the matter is private.”
This is particularly interesting considering Tesla waited to be able to establish a local manufacturing capacity in China until they were allowed to do so without a joint-venture partner.
Though in this case, a partner could be purely for funding with a financial interest.
Tesla didn’t comment on Bloomberg’s report.
Last month, Tesla said that it expects “construction to begin in the near future” and that it “will take roughly two years” until they 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 CEO Elon Musk has previously said that all future gigafactories will produce both complete vehicles and the battery cells needed to build those vehicles.
Honestly, I would take this with a grain of salt since it is based on only one anonymous source.
That said, $5 billion would make sense. That’s roughly the same original investment the company planned to make at Gigafactory 1 in order to reach full production.
But Gigafactory 3 would be a different beast with both battery cell production and 500,000 vehicles per year.
If Tesla expects to achieve that with roughly the same investment as Gigafactory 1, it means that they learned a lot from the project and they have seen a potential for optimization.
As for a partner, Tesla already has some important ties in China that could help with funding. Tencent acquired a total 5% stake in Tesla last year and they could potentially be interested in the project.
Either way, it will be a lot of money that Tesla will need to put together, but it will be spread out throughout about 5 years if we are to believe Tesla’s timeline.
Could they pay for it through their own profit as they aim to be cash flow positive by the end of the year or will they have to raise money to make the project happen?
Let us know what you think in the comment section below.