With the release of Tesla’s third quarter financial results today, we learned an interesting detail about Tesla’s “accelerated plan” to establish manufacturing capacity in China.
The automaker confirmed that they plan to bring “portions of Model 3 production to China during 2019.”
Earlier this summer, the company announced a deal with the Shanghai government to build a wholly owned local factory.
They have now accelerated their plans in response to the trade war between the US and China.
In their Q3 report, Tesla said that the new 40% tariff on imported American cars is affecting their sales in the important market and on top of it, tariffs on parts from China are also affecting production in the US.
“For all three vehicles, additional tariffs in Q4 on parts sourced from China will impact our gross profit negatively by roughly $50 million.
In the shareholder letter, Tesla now says that they plan to have some parts of Model 3 production in China as soon as next year:
“In order to significantly increase the affordability of Model 3, we have decided to accelerate our manufacturing timeline in China. We are aiming to bring portions of Model 3 production to China during 2019 and to progressively increase the level of localization through local sourcing and manufacturing. Production in China will be designated only for local customers.”
That’s faster than it was previously expected.
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.”
Earlier this week, we reported that work started at the site of the factory in Shanghai.
Based on those new comments, it looks like things could move very fast over the next few months.
Earlier today, we also reported that Tesla also plans to produce Model Y at Gigafactory 3 in China.
Many people have speculated that Tesla could try to bring just enough production steps to meet regulations to be considered ‘made in China’ in order to bypass the tariffs as soon as possible.
It sounds like that’s what they are attempting based on those new comments.
But even if it’s just final assembly like Tesla does in Europe, next year still sounds like an aggressive target – even for China.
What do you think? Let us know in the comment section below.
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