Tesla breaks ground on factory in Shanghai

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Construction begins just three months after Tesla secured a land parcel at Lingang, Shanghai for the Gigafactory 3, its first plant outside the United States.

"Shanghai Giga production of Model 3/Y will serve greater China region... not North America".

The Shanghai Gigafactory is significant not just because it's Tesla's first fully owned factory in China, but because it is the first wholly foreign-owned vehicle plant of any overseas auto manufacturer in China.

China-based manufacturing will help avoid sanctions from the Chinese government amid the US-China trade war, where the US imposed 25 percent import tariffs on steel and 10 percent on aluminium, and China slapped US exports with matching retaliatory sanctions. "All Model S/X & higher cost versions of Model 3/Y will still be built in USA for WW market, incl China", he further tweeted.

According to CNBC, the company says the Shanghai factory "will allow Tesla to localize production of Model 3 and future models sold in China, with plans to eventually produce approximately 3,000 Model 3 vehicles per week in the initial phase and to ramp up to 500,000 vehicles per year when fully operational (subject to local factors including regulatory approval and supply chain constraints)".

The China plant is the result of years of negotiations with local authorities, and marks somewhat of a personal triumph for Musk who faced a disastrous 2018.

"Affordable cars must be made on same continent as customers", Musk said in another tweet.

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Tesla's US-made cars are now subject to a 15 per cent tariff in the mainland after Beijing rolled back an extra 25 per cent tariff it slapped on U.S. auto imports for three months from January 1.

The electric automaker purchased the site a year ago for roughly $140,000 and intends on building the 860,000-square-meter site far quicker than is typical of automotive factories, Forbes reports. Tesla fell behind on its lofty manufacturing and delivery promises for Model 3, causing volatile stock prices and even prompting Musk to sleep at the Tesla factory.

Tesla's first Gigafactory in Nevada produces Model 3's drive units and battery packs.

Musk and Shanghai government officials attended the ground-breaking ceremony.

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

The plant, which is Tesla's first outside the U.S., is located at Lingang, a high-end manufacturing park in the southeast harbour of Shanghai.

Apple sparked global alarm over the prospects for the world's second-largest economy last week when it cut its revenue forecast citing slowing demand in China and the trade war.

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