With the ceremonial groundbreaking at the plant east of downtown Shanghai on Monday, Tesla now faces a race to start local production to take advantage of robust demand for electric vehicles in the world’s biggest auto market.
Chief Executive Elon Musk was on hand at the 210-acre site to press a button to “switch on” the plant, which at the moment is a field. Mr. Musk said he aims to build the plant “in record time.” Initial production of the Model 3 could start by the end of the year, he said, with the factory “achieving volume production next year.”
“It makes sense for Tesla to commit fully to becoming a leading EV brand in the world’s largest EV market,” said Bill Russo, chief executive of Shanghai-based consulting firm Automobility.
Tesla was the first foreign auto maker to take advantage of a recent rule change allowing foreigners to own their China business, instead of having to work with Chinese partners as previously required. That is a gamble, Mr. Russo said. “It will take billions of dollars to build a new footprint in China,” he said. “As 100% owner, this burden falls on Tesla.”
China is central to Telsa’s aim of graduating from niche startup to mainstream global auto maker. Tesla’s existing plant in Fremont, Calif., is ramping up to produce 500,000 annual capacity. The Shanghai plant is designed to make another 500,000 cars annually—a massive step up for a company that sold fewer than 14,000 cars in China in the first nine months of 2018, according to LMC Automotive, which tracks the auto market. The plant will build the Model 3, and the yet-to-be-launched Model Y small crossover.
Having control isn’t likely to free Tesla from China’s onerous bureaucracy nor safeguard its intellectual property, Mr. Russo warned. “Chinese authorities will likely try to influence everything from how Tesla stores customer data to its local supplier selections,” he said.
Good luck with that.
Musk does not do anything in record time. Nor does Musk produce a quality product. This will be interesting.
Mike "Mish" Shedlock