The Shanghai factory is expected to double Tesla’s manufacturing capacity, while cutting prices in the world’s biggest market for electric vehicles
Tesla said it has acquired a plot of land in Shanghai for its first planned electric car factory outside the US, where it expects to build 500,000 cars per year by 2020.
In a production update for the third quarter this month, Tesla said it was “accelerating” the construction of the Shanghai factory in response to the trade dispute between the US and China, which has raised prices in China for vehicles imported from the US.
The factory would allow Tesla to get around such restrictions by selling locally built cars in the fast-growing Chinese market, which is the largest for electric vehicles and is Tesla’s second-biggest market after the US.
Tesla sold about 17,000 cars in China last year, compared with about 50,000 in the US and 103,000 globally.
“Securing this site in Shanghai, Tesla’s first Gigafactory outside of the United States, is an important milestone for what will be our next advanced, sustainably developed manufacturing site,” said Robin Ren, Tesla’s vice president of worldwide sales, in a statement published folowing a signing ceremony in Shanghai on Wednesday.
The Shanghai government said a plot of land of 864,885 square metres in the eastern Lingang district had been sold at auction for 973 million yuan ($140.5m, or £107m) in a deal that matches the land deal described by Tesla, although the company didn’t confirm the price it had paid.
Tesla chief executive Elon Musk signed an agreement in July with Shanghai to build the factory, which is to be wholly owned by Tesla.
In July China imposed a 25 percent tariff on new US automobiles, on top of the 15 percent it levies on all imported vehicles, in retaliation for new auto tariffs in the US.
Tesla’s vehicles cost 55 to 60 percent more in China than comparable cars built locally, the company has said.
The factory is expected to cost $2bn to build and to roughly double Tesla’s manufacturing capacity. Industry analysts have said they expect it to take two or three years before Tesla can begin production in China.
Tesla said it delivered some 83,500 electric vehicles in the third quarter, as it seeks to expand production in an area considered key for the future of transportation.