Tesla, Inc should begin building its first Made-in-China Tesla electric sedans at its new Gigafactory in Shanghai by the second half of 2019.
The Shanghai city government on its social media account revealed that Tesla might start manufacturing in the second half. Tesla, however, hasn't confirmed this statement and is still soliciting bids related to building its Gigafactory 3, which will demand an investment of more than $2 billion.
Built on a 220-acre plot, Gigafactory 3 is Tesla's first overseas factory. It will make the Model 3 and the latest version, the Model Y sedans, which will be exclusive to China. Tesla expects Gigafactory 3 to have an annual production capacity of 250,000 vehicles.
Shanghai officials noted that the Tesla Gigafactory is the largest foreign-funded manufacturing project in Shanghai's history. Analysts said a Chinese factory will help Tesla avoid the new import taxes since the firm can now make its cars in China, and then sell the cars directly to Chinese consumers or to those in other Asian countries.
China has bent over backward to accommodate Tesla's multi-billion dollar investment. In April, China announced amended foreign investment rules that lifted caps for foreign investment in the electric car industry, thereby allowing Tesla to operate in China without the need for a local business partner.
In May, Tesla registered a company in Shanghai for the manufacturing and sale of electric cars. It later signed an agreement with the Shanghai government to build its Gigafactory. The deal was clinched after Musk traveled to Shanghai in July just after the first round of Trump's anti-China tariffs took effect.
In October, Tesla said it had decided to accelerate its manufacturing timeline in China "in order to significantly increase the affordability of Model 3. It also said it aims to bring portions of Model 3 production to China during 2019.
Tesla slashed its prices three times between October and December due to the massive 70% slump in its electric vehicle (EV) sales year-on-year. Tesla latest price drop came last week, reducing the price of it's Model 3 to $72,000 in China. This amount is $11,500 cheaper than in November when Tesla started taking orders for the model in China.
The reduction came after China agreed to bring duties on imported U.S. cars back down to 15% for three months.
In 2019, China will replace its monetary subsidies for EVs with a cap-and-trade system for the EV industry. All carmakers in China, including Tesla, need to meet EV production quotas that will increase each year. Firms that meet the quota will get credits they can sell to competitors that don't manage to do so.
In July, the Shanghai municipal government gave Tesla the green light to build the Gigafactory after years of negotiations with Chinese officials. The first Tesla electric cars should begin rolling off the Shanghai production line within three years, said Musk.
Tesla is the largest maker of electric cars in the United States. It produces its Model S, X and 3 all-electric vehicles at Fremont, California. Last May, Trump admitted the Fremont factory is overloaded and said Tesla would announce locations for two new Tesla factories as early as this summer. The first of these locations is China.
