Elon Musk breaks ground on first Tesla factory outside US

Matthew DeBord  Business Insider

Matthew DeBord Business Insider

Tesla broke ground on Monday for its Shanghai "Gigafactory" where it plans to begin making its Model 3 electric vehicles (EV) by year-end, a first step in localising production in the world's largest auto market.

Chinese media reports said Musk would be in Shanghai to break ground on the plant, which Bloomberg News has reported could cost $5 billion.

"Aiming to finish initial construction this summer, start Model 3 production end of the year & reach high-volume production next year".

Shares in Chinese suppliers to Tesla, including Tianjin Motor Dies Co Ltd and VT Industrial Technology Co Ltd, rallied on Monday after Musk's tweets.

The $5 billion investment comes at a tenuous time in relations between the USA and China.

The production at the Shanghai plant will help Tesla significantly lower its cost and prices, giving it more edge in the market competition.

Construction on the US electric vehicle maker's first Chinese factory has officially begun, reports Reuters.

Tesla has registered over 14,000 Model 3 VINs during the first eight days of January 2019.

"China is becoming the global leader in electric vehicle adoption, and it is a market that is critical to Tesla's mission to accelerate the world's transition to sustainable energy", Musk said, according to a company release.

Tesla was the first foreign auto maker to take advantage of a recent rule change allowing foreigners to own their China business, instead of having to work with Chinese partners as previously required.

'Affordable cars must be made on same continent as customers, ' Musk wrote on Twitter ahead of the event. Apple triggered global equity losses last week when it said slackening Chinese demand spurred it to cut its revenue outlook for the first time in nearly two decades.

Earlier announcements for Gigafactory 3 stated that the target production size of 200,000 vehicles should be achieved within two years.

Tesla has said it plans to use mostly local debt to fund the factory.

Musk has also said the company needs the Chinese factory, outside Shanghai, to reduce tariffs that China imposed on imported cars in retaliation for President Trump's tariffs on Chinese steel.

Tesla (TSLA) bought the land for the factory outside Shanghai in October for $140 million.

The plant in a Shanghai suburb is Musk's biggest overseas move yet and will eventually have an annual production capacity of 500,000 vehicles, Tesla says, dramatically increasing the California-based company's output.

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