Tesla to build cars in China within 3-4 years
Bloomberg reports that Tesla founder Elon Musk says the company will establish a manufacturing facility in China within the next 3-4 years.
Tesla’s California manufacturing facility could make 500,000 vehicles which is equivalent to the battery production capacity Tesla plans to get from its gigafactory that it announced this year. But while Tesla may have the production capacity domestically, building Tesla vehicles in China would allow the company to avoid the 25 percent import tariff.
Many remain skeptical about the Chinese market. Despite how difficult it is to get a license plate issued for a gasoline powered car, it still remains very easy to get one issued for an alternative energy vehicle. Still, selling EVs in China has proven a challenge even if pollution in Beijing and Shanghai is some of the worst in the world. The Chinese government has a goal of 5 million alternative energy vehicles by 2020 but is behind on its goal.
Unlike many other automakers, Tesla isn’t jacking up its price considerably in China but is opting to sell the vehicle in China with a similar margin to what the company gets in the U.S. (the price is higher in China due to the tariff). Many other automakers go for a very high margin in China because for the luxury class there, a more expensive vehicle often signals greater status.
I’m cautiously optimistic about the Chinese market because Tesla realizes it’ll need to make a major investment in a charging network, which will support sales. I also believe that just because the Chinese haven’t gravitated to EVs in the past doesn’t mean they won’t in the future, particularly at the high end where something new and different is prized. Selling a mid market EV in China? Now that’s a different story.
