Tesla Seeks $776m Expansion Of Texas Gigafactory

Tesla is seeking to expand its manufacturing capacity in the US, despite some oversupply issues with its gigafactory in Shanghai.

Reuters reported, citing government filings, that Tesla has applied to expand its gigafactory in Texas with an investment totalling $775.7 million.

This would one of Tesla’s largest expansion moves in recent times, after it spent $5.5 billion constructing a gigafactory in Germany last year, joining its existing assembly plants in California, Shanghai, and Texas.

Shanghai issues

Elon Musk had opened Tesla’s factory (Gigafactory 3) in Shanghai back in 2020, but recently it has experienced Covid-driven production and logistics snags, as well as growing concern of weakening customer demand.

In early December it was reported that Tesla planned to lower production at its Shanghai factory – the first time it had voluntarily reduced manufacturing capacity there since the plant opened in late 2020.

The move was the latest indication that demand for Tesla’s vehicles in China, the world’s biggest car market, was not keeping up with supply.

Tesla had completed an upgrade to the Shanghai plant over the summer 2022 intended to double its capacity to about 1 million cars a year and inventory levels increased sharply since then.

In response to the slowing demand in China, Tesla cut prices for its Model 3 and Model Y cars by up to 9 percent in China, and offered insurance incentives.

Tesla’s previous production drops at the Shanghai plant were caused by the city’s two-month Covid lockdown and supply-chain issues.

Just after Christmas 2022 it was reported that Tesla planned to run its key Shanghai plant on a reduced schedule in January 2023, continuing its reduced production that began earlier in December.

The Shanghai plant, with about 20,000 workers, accounted for more than half of Tesla’s production for the first three quarters of 2022.

Earlier this month Tesla revealed it had shipped a record 1.3 million vehicles last year, a 40 percent increase from the previous year, but it had missed analysts’ expectations.

Texas expansion

Now Reuters has reported that Tesla has applied to expand its gigafactory in Texas with an investment totaling $775.7 million.

The electric vehicle (EV) maker plans to add five new facilities at its Austin site, including a cell test lab and a unit named “Cathode”, according to the company’s filings on the Texas state department of licensing’s website on Monday and Tuesday.

The Austin expansion comes days after Tesla promoted its China chief Tom Zhu to take direct oversight of the carmaker’s US assembly plants as well as sales operations in North America and Europe.

The company is expected to host its investor day on 1 March at the Austin facility and will likely disclose plans for expansion and capital allocation then.

Tesla also has a gigafactory in Nevada, and a production facility in Fremont, California. It also reportedly has plans to open a factory in Mexico.

Tesla’s shares fell by 65 percent in 2022 and fell 54 percent in the final quarter alone as investors become increasingly worried that Musk is focusing too much on the reorganisation of Twitter, which he bought for $44 billion (£37bn) in October.