Jul 11, 2018 (China Knowledge) - The Shanghai municipal government announced on Tuesday that Tesla Inc. would establish a factory in Shanghai, which will be solely owned by Tesla and set a planned output target of 500,000 vehicles per year. The move is expected to boost Tesla's sales in China, the world's largest car market.
"Today, we have signed a cooperative agreement for Tesla to start building Gigafactory 3, a new electric vehicle manufacturing facility in Shanghai," Tesla said in a statement.
The US electric car manufacturer is set to be the first beneficiary of China's new policy, which enables foreign automakers to own their own production businesses in China without the need to find local joint venture partners. "In this regard, I wish to express my appreciation to the Chinese government," Tesla Chief Executive Officer Elon Musk said in a recent earnings conference call.
In a series of policies introduced over the past few months, Beijing also relaxed limits on foreign ownership of auto manufacturers, when it announced the scrapping of foreign ownership caps on commercial vehicle firms in 2020 and that of the passenger vehicle firms in 2022.
Tesla said that it expects the new factory to be completed in two years and hit its production peak of an annual output of 500,000 vehicles after two or three years of completion. Tesla, which shipped 103,000 cars last year, regards its foothold in China as an important step to achieve the global economies of scale needed to compete with electric vehicle manufacturers in the mass market. Some of these competitors are expected to come from China.
The world's two largest economies are currently laying out their strategic industries for the future, including new energy vehicles (NEV), advanced materials and computing power.
The Trump administration is trying to drag U.S. enterprises back to the US through a series of measures, including imposing high tariffs on imported products, lowering corporate taxes and relaxing environmental protection regulations. In face of US tariffs that could undermine global supply chains, the world's second largest economy is trying to attract multinational companies by securing commitments from them to enter its market.
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