Tesla breaks ground on factory in Shanghai

Tesla breaks ground on factory in Shanghai

Tesla Chief Executive Elon Musk says the company will break ground on Monday for its Shanghai Gigafactory where it will begin making Model 3 electric vehicles (EV) by year-end.

Elon Musk joined the mayor of Shanghai on Monday for the groundbreaking ceremony of Tesla's first factory outside the USA and in the world's largest electric vehicle (EV) market, China. On Twitter, he explained that his company's new "Gigafactory" would be focused on producing Tesla's most affordable models, the Model 3 and the yet-to-be-revealed Model Y, for sale in Greater China.

Despite its relative affordability compared with other Tesla models, the price of a US-made Model 3 starts at about US$50,000, but Musk has said that he aims to get the price down to US$35,000.

After four years of planning, Tesla Inc. finally broke ground on its planned $5 billion factory in the world's biggest auto market.

Tesla is now heading into risky waters with China.

The carmaker, which now imports US-made vehicles to sell in China, is building the plant in an auto market that is set to contract this year for the first time in decades, though so-called new-energy vehicle (NEV) sales have been strong.

With the ownership restriction removed, Tesla became the first foreign carmaker to set up a wholly-owned new-energy vehicle (NEV) factory in the mainland. It will help Tesla to mitigate the effects of the ongoing US-China trade war by eliminating the impact of rising export costs.

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The trade clash reflects American anxiety about China's rise as a potential competitor in telecommunications and other technology. The talks are occurring as Chinese growth - 6.5 percent in the July-to-September period - fell to its lowest point in a decade.

"With the resources here, I think we can build the Shanghai Gigafactory in a record time", Musk said.

In November, Tesla cut the prices of its Model X and Model S in China by 12 to 26 percent.

Trade war aside, the carmaker is building the plant in an auto market that likely contracted previous year for the first time in decades.

It has an annual production capacity of 500,000 electric cars.

Musk has also said the company needs the Chinese factory, outside Shanghai, to reduce tariffs that China imposed on imported cars in retaliation for President Trump's tariffs on Chinese steel.

A previous version of this article stated that Tesla officially announced plans for the factory in July 2018.

The electric automaker purchased the site previous year for roughly $140,000 and intends on building the 860,000-square-meter site far quicker than is typical of automotive factories, Forbes reports.

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