Tesla is rumored to be behind massive land deal in China

Tesla is rumored to be behind a massive new land deal to secure over 100 acres next to its Gigafactory Shanghai in China.

Gigafactory Shanghai has been expanding so fast that Tesla is running out of space to physically grow at the location in the Shanghai free-trade zone.

After quickly managing to build the first phase in 2019, Tesla started production at the plant in 2020, and they managed to quickly ramp up production, resulting in the factory contributing more than 140,000 cars to Tesla’s record year.

They produce Model 3 and Model Y vehicles at the factory.

Recent drone videos show that Tesla is still expanding at the Gigafactory Shanghai site where the automaker keeps adding new buildings.

Now reports from China are stating that Tesla is behind a new deal to secure another 113 acres of land next to the factory.

Global Times reports:

A plot of 461,142 square meters located within the Lingang heavy equipment industrial zone was transferred for the use of new-energy vehicle manufacturing with the investment intensity of no less than 14,925 yuan per square meter, a land transfer announcement on the official website of Shanghai land market showed on Monday.

Tesla is not officially named in the document (pictured below), but the automaker is believed to be behind the deal to expand Gigafactory Shanghai:

Tesla owns the buildings it is constructing at the site, but it doesn’t own the land.

Instead, the American automaker benefits from a deal that includes land use rights with an initial term of 50 years.

The company wrote in a recent SEC filing:

We have an operating lease arrangement for an initial term of 50 years with the local government of Shanghai for land use rights where we are constructing Gigafactory Shanghai. Under the terms of the arrangement, we are required to spend RMB 14.08 billion in capital expenditures, and to generate RMB 2.23 billion of annual tax revenues starting at the end of 2023. If we are unwilling or unable to meet such target or obtain periodic project approvals, in accordance with the Chinese government’s standard terms for such arrangements, we would be required to revert the site to the local government and receive compensation for the remaining value of the land lease, buildings and fixtures. We believe the capital expenditure requirement and the tax revenue target will be attainable even if our actual vehicle production was far lower than the volumes we are forecasting.

The adjacent piece of land is expected to be added to that deal.

Tesla is rumored to be using the land to potentially build its upcoming new $25,000 electric car, which is expected to be both designed and produced in China.

The automaker recently confirmed that it plans to expand Gigafactory Shanghai from a current output of 250,000 vehicles per year to 450,000 vehicles per year.