Tesla Sets Big Goals for China Factory Amid Auto Market Slump

China's auto sales have fallen drastically this year, yet Tesla's new model, set to launch production in Shanghai this month, just may break the bank.

Author: Yaning Ying   

Tesla Inc.'s (Nasdaq: TSLA) Shanghai factory is scheduled to kick off production in mid-October, as reported by various sources. After that, its target is rolling at least 1,000 Model 3s off the production line weekly by year's end. However, as Reuters reports, some factors may hinder the process.

The facility is Tesla's first factory overseas and the first electric vehicle factory wholly-owned by a foreign manufacturer in China. The plant, worth $2 billion, was constructed from January to September, gaining the critical government approval last month, Reuters reported.

"We aim to start some production in October, but the actual production volume depends on many factors including car orders we received, performance of newly hired workers, supply chain and so on," a Tesla source told Reuters.

According to Tesla's 2018 annual report, its revenue from China declined by 13.3% from $2 billion in 2017 to $1.8 billion in 2018. The slump occurred in line with the slowdown in China's entire auto sector. This year, however, Tesla's China sales soared 98% after the release of Model 3, Reuters said citing research from LMC Automotive.

Amid the ongoing trade tensions between China and the United States, Tesla may face rising tariffs when importing to the U.S. However, the move to Shanghai allows the automaker to avoid China's 25% tariffs on U.S.-made vehicles.

Meanwhile, in late August, the Chinese Ministry of Industry and Information Technology (MIIT) has released the latest list of new energy vehicles exempted from vehicle purchase tax. According to this list, Tesla Model 3, Model SS and Model X, among others, have made the list of tax-exempted vehicles.