After an event earlier this week at the Tesla (WKN: A1CX3T) delivered the first Model 3 made in China to employees in the country, the automaker is now ready to begin delivering the vehicle to Chinese customers. According to Reuters, Tesla will celebrate the first deliveries to customers at the new plant in Shanghai less than a month before the Chinese New Year.
This shows how quickly Tesla has moved from factory construction to complete vehicle production. Tesla is thus well positioned in the largest car market in the world.
Tesla’s Shanghai factory
When Tesla broke ground on January 6, 2019 for its plant in China, few would have thought that the automaker would only start production in the factory a year later. But that’s exactly what happened.
Tesla is now ready to begin shipping vehicles manufactured in Shanghai. The company also announced on January 3 that the plant was already “producing over 3,000 units a week, excluding local battery production that started in late December”.
In addition, Tesla said in its third quarter update that it already has the equipment in the Shanghai factory for a production volume of 150,000 units per year – a level that is approximately 40% of Tesla’s current annual global deliveries.
It takes time for vehicle production rates to reach full speed. But Tesla has already achieved high production volumes with the Model 3 at its Fremont, California facility, so the company will likely be able to increase production of the Model 3 made in Shanghai even faster.
The management announced in the second quarter result that “Gigafactory Shanghai will produce on a large scale in the second half of 2020”.
A huge opportunity
You don’t have to explain how important this factory is for Tesla. As the world’s largest car market, China represents an enormous growth opportunity.
Even if Tesla achieves a production rate of 150,000 Model 3 units per year in China, it could only be the tip of the iceberg. CEO Elon Musk, known to be overly ambitious with some of his goals, expects China’s long-term Model 3 demand to be 5,000 units a week. But even if it estimates 20%, it still means over 200,000 Model 3 deliveries a year in China.
Tesla can circumvent import tariffs by producing cars for Chinese customers in China. This enables more competitive pricing of vehicles. It also qualifies for an electric vehicle subsidy on the market, which helps keep the price at a competitive 299,050 RMB (about $ 42,900).
Is this the next wirecard?
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The Motley Fool owns shares of and recommends Tesla shares. Daniel Sparks does not own any of the stocks listed.
This Article appeared on 4.1.19 on Fool.com and was translated for our German readers.
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