Tesla is finalizing the details of its plan to build a much-needed Gigafactory in China.
The company is now reportedly closing in on a bid for a $145 million piece of land in Shanghai.
Recent changes in import duties for foreign vehicles in China are strongly affecting Tesla in the country – urging them to establish local manufacturing capacity.
The trade tensions have resulted in an import tariff rate of 40% on Tesla vehicles versus 15% for other imported cars in China.
“In addition, Tesla continues to lack access to cash incentives available to locally produced electric vehicles in China that are typically around 15% of MSRP or more. Taking ocean transport costs and import tariffs into account, Tesla is now operating at a 55% to 60% cost disadvantage compared to the exact same car locally produced in China. This makes for a challenging competitive environment, given that China is by far the largest market for electric vehicles. To address this issue, we are accelerating construction of our Shanghai factory, which we expect to be a capital efficient and rapid buildout, using many lessons learned from the Model 3 ramp in North America.”
Earlier this summer, the company announced a deal with the Shanghai government to build a wholly-owned local factory.
Bloomberg now reports that they are now closing in on a piece of land for the factory:
“The carmaker is the sole bidder for a plot of land with an auction price of about 1 billion yuan ($145 million), the people said, asking not to be identified as the information isn’t public. A decision by the Shanghai government to allocate the land to Tesla could be made as soon as this month, they said.”
When first announcing the plant, 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.”
They have yet to update the timeline since.
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.
During Tesla’s last earnings call, Musk said that Tesla expects to spend about $2 billion to quickly bring Gigafactory 3 to a production rate of about 250,000 vehicles per year before ramping up to full capacity.
In August, we reported that Tesla started hiring for Gigafactory 3 in China and now it sounds like they are lining up the land.