Tesla advances China push for 2019

By BLOOMBERG

SHANGHAI • Tesla Inc plans to start production in China in the second half of next year, the city of Shanghai said, as the US electric-car maker advances its push in the world’s largest auto market.

The mayor of the city, Ying Yong, visited the project site in the Lingang development zone in southeastern Shanghai and encouraged Tesla to accelerate construction, according to a statement on the city’s WeChat social media account yesterday. The plant, dubbed Gigafactory 3, will be the biggest ever foreign-invested manufacturing project in Shanghai. A Tesla representative didn’t have an immediate comment.

The Palo Alto, California based company has secured more than 200 acres (80.9ha) of land for the China factory, which is expected to cost several billion dollars to build.

Tesla’s first overseas plant will help the electric-car maker avoid some of the risks involved with importing vehicles, such as higher tariffs caused by the trade tensions between China and the US.While China is Tesla’s biggest market after the US, volumes in the country have been limited because the company has had to rely on imports. The 40% duty that China levies on cars brought from the US has had an impact on sales, the company said when reporting third-quarter earnings in October.

The tariff has left Tesla’s models at a pricing disadvantage against local electric-car rivals such as BYD Co Ltd, while new Chinese entrants including NIO Inc and Xpeng Motors are also racing to win over customers before Tesla starts its full-scale push in the country.

At the same time, the Chinese car market is headed for its first drop in at least two decades as economic headwinds, the trade war with the US and slumping stock prices weigh on consumers’ appetite to buy new vehicles.