Elon Musk says Tesla's Shanghai factory is 'groundbreaking'

Elon Musk says Tesla's Shanghai factory is 'groundbreaking'

Tesla boss Elon Musk presided Monday over the ground-breaking for a Shanghai factory that will allow the electric-car manufacturer to dodge the China-US tariff crossfire and sell directly to the world's biggest market for "green" vehicles.

In typically iconoclastic style, the 47-year-old Musk changed his Twitter profile picture around the time of the ceremony to one showing his face with an exaggerated handlebar moustache drawn on it. Tesla has said it plans to use mostly local debt to fund the factory. Tesla officials in China declined to comment.

The country's auto market is expected to have shrunk a year ago for the first time in decades but demand for electric vehicles remains strong.

Tesla's US-made cars are now subject to a 15 per cent tariff in the mainland after Beijing rolled back an extra 25 per cent tariff it slapped on USA vehicle imports for three months from January 1. The lower tariff will last until the end of March pending trade talks. Keeping prices in check will also help Tesla fend off competition from a swathe of domestic EV startups such as Nio Inc, Byton and XPeng Motors.

A clutch of mainland electric vehicle start-ups such as Nio and Xpeng Motors are revving up production and development of their own models to woo local customers, taking advantage of the government's heavy subsidies to bolster sales of NEVs as a way of protecting the environment.

Earlier today, Tesla's Gigafactory in China, which is expected to produce the affordable versions of the Model 3 and the Model Y, held its groundbreaking event. "All Model S and Model X & higher cost versions of Model 3 and Model Y will still be built in United States for WW market, including China", he later added, referring to the worldwide market including China.

"And the competition is getting more and more fierce".

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Tesla purchased the land for the Shanghai factory just outside the city for approximately $140 million in October.

The so-called Gigafactory would also be China's first wholly foreign-owned auto plant, a reflection of China's broader shift to open up its vehicle market even amid a whipsawing trade war between Washington and Beijing.

The Shanghai-based Gigafactory should produce roughly 500,000 vehicles per year, much higher than most manufacturing plants producing from 200,000 to 300,000 units per year.

Elon Musk says the company is aiming to have the construction of the $2 billion factory finished this summer with the initial production models rolling off the lines by the end of the year before volume production ramps up in 2020.

Shares in Chinese suppliers to Tesla, including Tianjin Motor Dies Co Ltd and VT Industrial Technology Co Ltd, rallied on Monday after Musk's tweets. Shanghai's government has said limited production at the plant could begin by the second half of 2019, CNBC reported last month.

China is the largest market for electric vehicles, and most forecasters predict EV sales in the country will accelerate rapidly as government regulation drives toward a goal of 100 per cent electric vehicles by 2030.

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