Tesla Makes Gigafactory Breakthrough in Shanghai, Production to Start in 2019

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When the site is ready, it will initially build 3,000 Model 3s per week and when it reaches full capacity, match Tesla's planned volume for its factory in Fremont, California.

"Shanghai Giga will produce affordable versions of 3/Y for greater China", Musk tweeted Monday, noting the us sites will continue to construct higher cost versions and all Models S and X for the global market.

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.

As a final point, Elon Musk a year ago indicated that Model Y production may begin as early as November 2019.

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Tesla Inc chief executive officer Elon Musk said the maker of electric vehicles would break ground yesterday on a Shanghai factory that would allow it to sell direct to Chinese consumers and avoid tariffs from the China-US trade dispute. "China is becoming the global leader in electric vehicle adoption, and it is a market that is critical to Tesla's mission to accelerate the world's transition to sustainable energy", Musk said in a statement released by the manufacturer.

A local Chinese plant could be crucial for Tesla, which is facing a drop in demand in the USA, its biggest market, after reductions in federal tax credits for electric vehicles.

A fully owned facility in China means that Tesla doesn't need to share its profits and technology with Chinese partners, unlike other foreign carmakers who are required by the government in Beijing to form a domestic joint venture.

'Affordable cars must be made on same continent as customers, ' Musk wrote on Twitter ahead of the event.

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The ability to produce vehicles in China could give Tesla an edge as it would reduce tariffs to the country as well as ocean transport charges.

Model 3, for example, which starts at a price of Dollars 35,000 in the United States market, is sold between 500,000 yuan and 560,000 yuan (around USD 72,980 and USD 81,738) in China. Tesla said in October that it was operating at a 55 to 60 percent cost disadvantage due to tariffs and oceangoing shipping expenses to China.

But the pace of growth is expected to slow along with China's economy.

'With the construction of the Shanghai factory, the faster the better (for Tesla)'.

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The Shanghai factory will be Tesla's first production line outside the United States.