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Tesla inks agreement to manufacture vehicles in China

  image credit : Tesla

Electric car maker Tesla has signed a new agreement with the Shanghai Government in a groundbeaking deal which will see the Globe's most popular EV brand build its vehicles in the Asian region with the construction of a Giga-Factory it aims to produce an annual output of 500,000 vehicles after construction.

The agreement was sealed today by Tesla CEO Elon Musk for the company to start building what is its second car assembly plant with the company waiting for approval and various permits before it starts construction.

This move intended for the construction of the dubbed "Gigafactory 3" notably comes several price hikes have been made in relation to the burgeoning U.S.-China trade wars with EV publisher Electrek recently reporting a $20,000 increase in the price of the Model X and S in the Chinese region.

Tesla has clarified that the new assembling factory will be wholly owned and operated by the company itself which has raised some questions about how Tesla with $2.7 Billion cash at hand as at this year's first quarter and also currently burning through cash is going to go about the financing of this huge construction estimated by several analysts to cost between $4-5 Billion.





Tesla recently reached its goal of producing 5,000 units of its mass market vehicle, The Model 3 within a week and with continued sustenance of this speed, Musk suggests will help the EV manufacturer turn a profit in soon time which would be a boost for the company's cash hoard and improve the company's operations if it happens this year as suggested.

Tesla made a huge $2 Billion in revenue from the Chinese region last year which indicates strong sales in the market even with several costs related to tariffs and exportation of its vehicles to the region which will make a constructed factory in China a positive boost for the company as it likely would boost sales while churning out vehicles at a faster rate for the world''s largest electric vehicle market.

The proposed manufacturing facility is expected to reach its full vehicle output capacity after some years of operation and also notably stands as the first factory to be built by a foreign automaker in the Chinese region without an agreement or joint venture with a Chinese company.

Tesla which made over $11 Billion in revenue last year and produced over 100,000 vehicles was said to be reluctant in entering a joint venture with another company in a bid to protect the company's intellectual property while it made moves to grab more stakes in the very competitive EV market it currently leads.

Along with Tesla, Several other startups have popped up in the rapidly growing EV industry backed by huge funding which include Byton which raised $500 million last month and NIO which confidentially filed for a $2 Billion IPO 2 months ago and both notably hail from the Chinese region which makes the location a very targeted one for Global EV manufacturers.



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