Electric car maker Tesla’s Shanghai plant is in production, marking an important step in ceo Elon Musk’s goal of establishing a global dominance of electric vehicles and heralding the beginning of a truly competitive era in the world’s largest electric car market,media reported.
On Tuesday, Musk hosted the first delivery of a home-made Model 3 to Chinese consumers at his Shanghai plant. The Shanghai plant is Tesla’s first outside the United States. Technically, Tesla has been delivering new cars in China since last week, but those cars have been delivered to its own employees.
Local production could help Musk and Tesla capitalise on the recent momentum in China, which is also the world’s largest market for gasoline consumption. Tesla is making a big push into the Chinese market, with its electric cars no higher than those of local Chinese carmakers such as NIO and Xiaopeng, but far lower than global giants such as BMW and Daimler.
The approval and pace of approvals and construction at Tesla’s Shanghai plant set a new record, representing the cornerstone of Musk’s plan to turn Tesla into a truly global automaker. Under the plan, the company announced plans in November to build a new plant in the Heart of Germany to meet Europe’s rapidly growing demand for electric vehicles.
For now, Tesla needs to avoid repeating the mistakes it made when it built its original car plant in California. There, the company experienced what Musk called “production hell” as it ramped up production on the Model 3. Tesla burned billions of dollars and ran out of money in a matter of weeks because of delays in achieving The Desire target set by Musk.
Tesla’s share price has been rising since it reported its surprise third-quarter earnings in late October. Tesla’s base is much stronger, and it has addressed many of the problems that limit the initial production of model 3s and has managed to help sell far more electric vehicles than other U.S. automakers produce.
Song Gang, the Shanghai plant’s manufacturing director, said on December 30th that the plant had assembled more than 1,000 cars a week, with the goal of doubling that number next year. The company has said it plans to increase Annual Production of Model 3 to 150,000 vehicles, or about 3,000 a week, when the plant is completed.
In addition, capacity at the Shanghai plant is expected to increase to 500,000 vehicles after the second phase of the project, though it is unclear when Tesla expects to achieve those goals.
Musk’s charm offensive in China seems to have paid off. The Shanghai factory is about a 90-minute drive from the center of Shanghai, which was initially a muddy wasteland. But since ground breaking ground in early 2019, the Shanghai plant has been completed soon. Tesla’s superplant near Reno, Nevada, was built twice as long as its Shanghai plant before it began mass-producing batteries.
In China, Tesla has received a variety of concessions, from approvals to subsidies. Tesla’s home-made Model 3 was added to the 10 percent purchase tax-exempt list last month and is eligible for a government subsidy of 24,750 yuan (about $3,560) per vehicle.
The subsidies helped Tesla cut prices, and last week the company announced that it would cut the Model 3’s starting price by 9 percent to $323,800, then to $299,050. Happily, the price of the car is likely to fall further, as people familiar with the matter say Tesla is considering further lower prices by using more local components and cutting costs.
Song Gang, the manufacturing director, said about 30 per cent of the parts currently used at Tesla’s Shanghai plant were locally sourced, and the company plans to increase that to 100 per cent by the end of 2020. That has pushed Tesla cars closer to domestic electric cars, such as Xiaopeng’s latest P7 sedan, which starts at 240,000 yuan. NIO SUVS START AT 358,000 YUAN.
Volkswagen’s Audi brand plans to start selling nine new energy vehicles in China over the next two years, more than half of which are purely battery-powered. Audi’s first electric model, the E-Tron, debuted in November 2019, starting at about 693,000 yuan.
Daimler’s Mercedes-Benz brand launched EQC in October, starting at 580,000 yuan. BMW plans to start making iX3 crossovers in China next year and is working with a Chinese partner to electrify its Mini models.
To sum up, Tesla has done pretty well in China so far, but it remains to be seen whether Musk will use his winning streak to conquer the Chinese market.