Tesla’s Gigafactory in China is set to go, with very optimistic targets

Singapore/Shanghai  — Elon Musk said he has never seen a factory built so quickly, and now he is about find out if it is up to the task it was created for.

Tesla’s new Shanghai Gigafactory, which only broke ground in January, is weeks from starting mass production of electric sedans. China’s first plant wholly owned by a foreign carmaker — and Tesla’s first outside the US — is a crucial test of Musk’s bid to keep Tesla profitable as he bets big on the world’s biggest market for electric vehicles (EV).

Musk has predicted that Tesla will make at least 1,000 cars a week in Shanghai by the end of 2019 — a volume the company’s original factory in California spent months trying to hit — and has hinted that a weekly rate of 3,000 is a target at some point.

With Tesla’s volatile stock price and strained finances, investors will be watching closely how the ramp-up unfolds. The multi-billion-dollar investment will be a deciding factor in determining whether Tesla will be able to take on local competitors and fend off challenges by the likes of Daimler and BMW.

The Shanghai roll-out will also provide clues about Tesla’s ability to truly go global. The company is planning to follow up with a production facility in a yet-to-be-announced location in Europe, where it is enjoying burgeoning sales growth in several markets.

Originally just a muddy plot about a 90-minute drive away from Shanghai’s city centre, Tesla’s Gigafactory now stands tall amid deserted crop fields and meadows with wild plants. Dozens of electric motorcycles and mostly petrol-powered cars are typically parked outside — used by workers to drive in from the closest residential area about 7km away. During lunch time, employees pour out for a meal prepared by street vendors.

The plant is already producing cars in small quantities as part of preparations. The final pieces of machinery were being installed in October, and State Grid Corporation of China opened the first transmission line to bring power to the facility that month. Tesla is working with local authorities to obtain manufacturing certification and hopes to get it by year-end, chair Robyn Denholm said this week in Shanghai.

The starting price of the locally made Model 3 sedan, which will only be sold in China, is about $50,000, making the luxury American brand more competitive with lower-cost domestic manufacturers, such as BAIC Motor Corporation and BYD, which offer functional sedans for just more than half that sum.

While the price tag is only slightly smaller than the most basic imported Teslas have been going for, the China-made versions will pack more features. It’s part of an attempt by Tesla to safeguard its brand image and pricing power in a market with hundreds of aspiring EV contenders.

Bloomberg