Tesla Inc. CEO Elon Musk was at his Shanghai Gigafactory on Tuesday to personally deliver 10 Tesla Model 3 all-electric four-door sedans assembled at the multi-billion dollar factory to its first 10 Chinese owners. This historic event comes slightly more than a week after Tesla on December 30 delivered the first 15 Model 3s ever assembled at Giga Shanghai to Tesla employees.
Musk, who delighted his Shanghai audience by briefly dancing on state, also made history with a series of announcements affecting Tesla operations in China and worldwide. He announced Tesla would make the Model Y, its lower-priced SUV, at Giga Shanghai. The company plans to open a design and engineering center in China with the aim of developing an "original car" for sale in markets around the world.
Musk said Tesla would also boost its investments in China to make the Model Y and other future models.
"We intend to continue making a significant investment and increasing the investment in China, making the Model 3 and the Model Y and future models also in China," said Musk to the audience in Shanghai.
"Something that would be super cool ... So we're going to do it ... is to try to create a China design and engineering center to actually design an original car in China for worldwide consumption. I think this will be very exciting."
Musk was particularly optimistic about the Model Y, an electric compact crossover utility vehicle (CUV) slightly smaller than its brother, the Tesla Model X e-SUV.
"Ultimately the Model Y will have more demand than probably all of the other cars of Tesla combined," he predicted.
Musk confirmed Tesla will start work on a production program for the Model Y at Giga Shanghai, making this factory the only production factory outside of the U.S. that will produce this new CUV.Tesla, however, will have to contend with both a shrinking market for new energy vehicles (NEVs) and motor vehicles, as well. The China Passenger Car Association reported that sales of NEVs plummeted 42% in November 2019 to 79,000 units.
The Chinese government has poured billions of dollars into the NEV segment in a bid to boost its competitiveness. Despite slashing NEV subsidies, Beijing last week said NEVs remain a priority as it combats pollution and reduces reliance on imported oil. Sales of NEVs have been falling since July 2019, mostly because of the lower subsidies.
Tesla might only be able to sell only 21,000 China-built Model 3s this year, according to LMC Automotive Ltd., a London-based firm that delivers market analysis and forecasts about the automotive industry. This forecast, should it pan out, spells big trouble for Tesla because Giga Shanghai can produce 1,000 Model 3s a week. Tesla plans to double this number in 2021.
Other analysts are more optimistic, however. Tesla might be able to sell 100,000 Model 3s this year, predicts Yale Zhang, managing director of Automotive Foresight (Shanghai) Co. Ltd., an automotive market and industry research firm.
