China will earn at least $323 million (RMB2.23 billion) in real estate and other taxes every year starting 2023 from the operation of Tesla Inc.'s mammoth Gigafactory 3 on the outskirts of Shanghai.
Shanghai municipal government officials revealed Tesla agreed to pay this amount when it starts generating annual tax revenues at the end of 2023. If Tesla refuses to pay the tax, it will have to return the land on which Gigafactory 3 sits to Shanghai.
The lease agreement with Shanghai also compels Tesla to spend $2 billion (RMB14.08 billion) in capital expenditure on Gigafactory 3 over the next five years. Shanghai officials claim these huge sums aren't at all disadvantageous to Tesla.
"We believe the capital expenditure requirement and the tax revenue target will be attainable even if our actual vehicle production was far lower than the volumes we are forecasting," said Tesla.
Construction progress at Gigafactory 3 remains remarkable considering work on this gigantic facility only began in January. As of Monday, the installation of some 35 industrial-grade air conditioning units for the general assembly building (GAB) where Tesla electric vehicles (EVs) will be assembled has been completed.
The AC units appear to have been installed on finished areas of GAB, which is also being fitted with EV production equipment. Tesla has also shared photos showing sections of the Model 3 production line being assembled.
Party Secretary Li Qian of the Shanghai city government visited the factory on July 19 and instructed Lingang Development & Construction Commission to wholeheartedly support the project.
Earlier this month, Ma Chunlei, Deputy Secretary-General of Shanghai Municipal People's Government and Director of Shanghai Development and Reform Commission, visited the mammoth factory.
Ma also the initial production capacity for Gigafactory 3 will be some 150,000 Model 3s annually. He made no mention of Model Y production numbers, however.
Ma said construction of Gigafactory has gone on smoothly and confirmed the installation of production equipment had already begun.
"The relevant authorities told me that they would start production at the end of this year, and then gradually climb to the production capacity of about 3,000 vehicles per week," said Ma.
"I believe that at the end of this year and early next year, every one may see or buy in Shanghai, China. Production of new energy vehicles from Tesla Model 3," he added.
The speed of Gigafactory 3's construction has been amazingly swift given the immense size and complexity of the facility. Construction of the massive general assembly building is expected to be completed in a few months.
Tesla announced the deal to build Gigafactory 3 with the Shanghai municipal government only in October 2018. Groundbreaking for the plant, which was attended by Tesla CEO Elon Musk, took place in January. A few weeks ago, Musk said Gigafactory 3 will begin producing Tesla EVs by November.
