Elon Musk pivots to China with Tesla's first foreign factory

Elon Musk pivots to China with Tesla's first foreign factory

"Today, we have signed a Cooperative Agreement for Tesla to start building Gigafactory 3, a new electric vehicle manufacturing facility in Shanghai", Tesla said in an emailed statement.

The Associated Press reports this announcement comes on the heels of growing trade tension between the USA and China, and Beijing's decision to stop restrictions on requiring outside automakers to work through locally-based joint ventures.

Tesla announced past year it was working with the Shanghai municipal government to explore the possibility of establishing a factory in the region. Local production would also allow Tesla to reach a wider audience of buyers in China and in the Asia-Pacific region, offering lower prices and tailoring the vehicles' offerings to the tastes of the local market.

Tesla shares rose 2 percent, to $325.17, on the Chinese factory announcement. Tesla produced 5,031 Model 3s in the last week of the second quarter in its Fremont plant, meeting a target that Musk had said was crucial to generating cash and earning profit. I'm sure Musk is just thinking "as soon as possible!" "The Shanghai municipal government will fully support the construction of the Tesla factory", its statement said.

Tesla hasn't provided an estimate of what the factory might cost to build.

Once the new China factory is operational, Tesla could build cars for the Chinese market without paying the new import duties.

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In November, Musk said Tesla is about three years away from starting production in the world's largest auto market. That would be more than double the current US market, where new light vehicle sales run at about 17 million vehicles a year.

Chinese authorities' decision to grant Tesla permission to move forward lands as President Trump is fighting to stop US manufacturers from responding to his trade policy by shifting production overseas, as USA motorcycle maker Harley-Davidson Inc (HOG.N) said it would do last month.

Tesla and Shanghai authorities did not immediately respond to requests for comment. The signing was held at Shanghai's Fairmont Peace Hotel but media attendance was limited, a Shanghai government official who declined to give his name told Reuters.

Tesla chief executive Elon Musk will meet with Chinese officialsBeijingnghai and Baijing this week. Bloomberg reported on Monday that Musk will visit Beijing on Wednesday and Thursday.

The move could help cement the brand in China and circumvent steep tariffs on the cars. Tesla probably will make the smaller Model 3 sedan and upcoming Model Y crossover in China, he said then, rather than the pricier Model S sedan or Model X sport utility vehicles, which often sell for more than $100,000 in the U.S.

Tesla sold 14,779 vehicles in China a year ago, according to data from LMC Automotive. The company was keen to maintain control of its plant and protect its technology. "We've been impressed by the beauty and energy of Shanghai and we want our factory to add to that".

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