American electric automaker Tesla Inc. has signed a land transfer agreement on a 210-acre (84-hectare) site with the Shanghai Planning and Land Resources Administration to secure land in the city of Shanghai for its first factory outside the United States. Tesla is moving forward with development in China despite mounting U.S.-Chinese trade tensions.


A Tesla Model 3 in China. 2018. Tesla expects most production of its EVs to remain in the United States,
but says the company "needs to establish local factories to ensure affordability for the markets they serve." (Photo courtesy Tesla)




The Shanghai Economic and Trade Commission, the Lingang Administrative Committee, the Lingang Group, and the Tesla Corporation attended the October 17 signing ceremony in Shanghai.


Tesla's new site is in the Lingang district in southeastern Shanghai.


Tesla CEO Elon Musk has said that the company will build a new "Gigafactory" in China that will produce batteries as well as vehicles.


"Tesla's mission is to 'accelerate the world's transition to sustainable energy,' not only to provide all types of electric vehicles, but also to provide scalable clean energy generation and storage products," said Ren Yuxiang, vice president of Tesla, at the signing ceremony.


"The Shanghai plant is Tesla’s first super factory outside the United States, and today’s signing is an important milestone in building it into a state-of-the-art, sustainable production base for Tesla," said Ren.


Shanghai is a center of China's auto industry and is home to state-owned Shanghai Automotive Industries Corp., the main local manufacturer for General Motors and Volkswagen.


China is the biggest global electric vehicle market and Tesla's second-largest after the United States.


Based in Palo Alto, California, Tesla announced plans for the Shanghai factory in July after the Chinese government said it would limit restrictions on full foreign ownership of electric vehicle makers to speed up industry development.


China is ending the restrictions despite tariff hikes by Washington and Beijing on billions of dollars of each other's goods in a dispute over Chinese technology policy.


U.S. imports targeted by Beijing's penalties include electric cars.


Until now, foreign automakers that wanted to manufacture in China were required to work through state-owned partners. Foreign brands balked at bringing electric vehicle technology into China where they might have toshare proprietary technology with potential future competitors.


Tesla joins global automakers, including General Motors Co., Volkswagen AG and Nissan Motor Corp., that are pouring billions into manufacturing electric vehicles in China.


Tesla has yet to announce a price tag for the new factory, but the Shanghai government said it would be the biggest foreign investment in the city to date.


Tesla said in its second-quarter investor letter that construction is expected to begin within the next few quarters, with "significant investment" coming next year. Much of the cost will be funded with "local debt" the letter said.


It remains to be seen whether China will prove to be a good market for the American EV maker. Tesla's estimated sales in China of under 15,000 vehicles in 2017 gave it a market share of less than three percent.


Lower-priced electric models from GM, Volkswagen and other global brands are due to hit the market starting this year, before Tesla is up and running in Shanghai.


The company also faces competition from Chinese brands such as BYD Auto and BAIC Group that already sell tens of thousands of hybrid and all-electric sedans and SUVs every year.


The first of the new electric models being developed by global automakers, Nissan's Sylphy Zero Emission, produced by Dongfeng Nissan Passenger Vehicle Co., began rolling off Dongfeng Nissan's Huadu plant in southern China in August.


As Nissan's first all-electric vehicle built in China specifically for Chinese consumers, the Nissan Sylphy Zero Emission promises to usher in a new era of electrification in the world's largest automotive market. The model was developed based on the platform of the world's best-selling electric vehicle, the Nissan LEAF, and the best-selling Nissan sedan in China, the Sylphy.


Tesla has said that production in Shanghai would begin two to three years after construction of the factory begins and eventually increase to 500,000 vehicles a year.


By Sunny Lewis

Environment News Service (ENS)

November 19, 2018