Tesla confirms China production 'is three years out'

Tesla has confirmed plans for its China plant are on track but it doesn't expect to make any serious investment towards it for at least another year and production won't begin for another three. Chief Executive Elon Musk told analysts: "I wouldn't expect any significant capex on China until 2019. It won't be material in 2018." Speaking in the third quarter earnings call, Musk confirmed a handful of details about the proposed facility, which is planned for a new free-trade zone in Shanghai. In terms of capacity, it will offer "at least a couple of hundred thousand vehicles a year, maybe more." He explained that it will not build the Model S or X, but will likely concentrate on the Model 3 and possibly the future Model Y. "It is really the only way to make the cars affordable in China, but it is three years out," Musk added. Most industry observers have agreed that the local facility will considerably reduce Tesla’s transportation cost and increase its global production capacity. "The idea of Tesla building a plant in China is quite reasonable, since it suits the development of the Chinese battery electric vehicle (BEV) market and benefits Tesla and investors. It is considered only a matter of time," observed Wijaya Ng, Head of Ipsos Business Consulting, Greater China. The Chinese government has been aggressively promoting the adoption of new energy vehicles, and local OEMs have been investing heavily. "The NEV market is a policy-driven market in China, and the continuous push from the government will further ensure a beneficial environment for NEVs. Under such a business environment, plus Tesla localisation, the company will benefit significantly by riding the trend," Ng told Automotive World. Tesla's plant is intended to support demand across the Asia Pacific, but China is clearly the key market. Musk didn't go into details about the reportedly wholly owned nature of the plant, but it is this aspect of the project which has attracted considerable speculation. If the plant is wholly owned it would mark a radical break from China's tradition of requiring a local joint venture partner. "Doing this in the restricted area of the free-trade zone is a move to still keep the automotive industry under control and not give out any hint or promises that the JV rule is up for discussion," suggested Beatrix Frisch, a well placed executive at a Chinese auto industry supplier. "There were hints in the recent Auto Industry Development policy but I doubt that the rule would be falling any time soon. This approach, in contrast, is a very clever move from the Chinese government... It shows the willingness of government to open new and alternative ways for EV manufacturers." As for pricing, Tesla has not yet indicated how the local plant could impact this. It is not expected to avoid China's hefty 25% import tax. "So far, most people in China use their Tesla as substitute for the days their normal ICE-powered car is banned," Frisch told Automotive World. "Tesla sells well in China because it is a good looking import car, not only because it is an EV." Tesla's Chief Financial Officer Deepak Ahuja has implied that further details on the China production project could emerge next quarter when the OEM provides full 2018 guidance and sheds light on capital spend plans.

Tesla confirms China production ‘is three years out’

Musk confirms intended volumes and model plans for the upcoming China production facility, writes Megan Lampinen

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