SHANGHAI (AFP) – Tesla unveiled plans on Tuesday to build a factory in Shanghai to dramatically increase its production capacity, with boss Elon Musk making his electric-car company’s biggest overseas move yet just as a US-China trade battle heats up.
Mr Musk said the plant, which has been in the works for a year, would eventually have an annual production capacity of 500,000 cars, and he hoped it would be “completed very soon.”
The announcement of the new Tesla venture comes as US companies face pressure from US President Donald Trump to keep manufacturing jobs at home, and as Beijing and Washington spar over terms of a trade in a fight that only last weekend significantly hiked the price of imported Teslas sold in China.
Analysts noted that the announcement included no details about how much the plant would cost or how it would be financed.
China already is the world’s biggest electric car market and is expected to grow further due in part to favourable government policies for the environmentally-friendly vehicles.
“Shanghai will be the location for the first Gigafactory outside the United States,” Mr Musk said in a statement released by the company and Shanghai’s government.
The plant, located in the Lingang district, “will be a state-of-the-art vehicle factory and a role model for sustainability. We hope it will be completed very soon.”
A Tesla spokesperson said the company expects construction to begin “in the near future,” with production beginning roughly two years later and another three more years before it reaches full production.
“Tesla is deeply committed to the Chinese market, and we look forward to building even more cars for our customers here,” the spokesperson said.
“Today’s announcement will not impact our US manufacturing operations, which continue to grow.”
Anticipation about a potential big Tesla investment had bubbled over the past year. The company last month told shareholders it was working with officials in Shanghai to establish a plant to build electric cars and battery packs intended for China.
But the announcement comes at a sensitive time US-Chinese trade relations.
Mr Trump has for years slammed what he describes as Beijing’s underhand economic treatment of the United States, with the US trade deficit in goods with China ballooning to a record $375.2 billion last year.
Following months of tension, start-stop negotiations and some Chinese concessions, the US on Friday pulled the trigger on 25 percent duties on about $34 billion in annual imports of Chinese machinery, electronics and high-tech equipment, including autos, computer hard drives and LEDs.
The move triggered immediate and dollar-for-dollar retaliation by China. Those tariffs raised the price on Tesla Model S to $142,000 from about $115,000, according to 24-7 Wall Street.
“It was long a plan and expectation that Tesla would open a plant in China,” said Efraim Levy, an analyst at CFRA Research. “It happens to be that now is when you have the trade altercation going on. I think it’s really coincidental.”
