Elon Musk has signed an agreement with the government in Shanghai to build a Tesla factory. According to reports, the factory will be capable of building more than 500,000 vehicles each year. This will make the new factory’s production level in line with the company’s main electric vehicle plant in Fremont, California. The factory can be Tesla’s another attempt at breaking into the world’s largest electric vehicle market. Many financial analysts have noted that Musk doesn’t have any other choice.
The US-China trade war forced the American automaker to raise its prices by 20%. Tesla sales in the China market have also slowed down. During the first quarter, the sales dropped to 15%. Later on, when tariffs were imposed, the sales dropped to 30%. After building another factory in the world’s largest factory, Tesla can bypass the tariff war between the US and China. This has been an idea since Musk mentioned it to the investors last year. Musk said that a China factory will be the only way for Tesla to compete with the prices of China’s local electric car makers. Musk also said that a factory in China will be the location for most of the mysterious Model Y crossover SUV’s production.
Fulfilling the demands has been a real struggle for Tesla in the past one year. Elon Musk called the company’s Model 3 a “production hell”. The company had to refit several production lines in order to cover the huge production backlog. The factory in China can give Tesla a fresh start in how it produces its vehicles and an opportunity to create a more efficient system. Tesla’s shares have also improved after taking a dive in the last week. The dip came from Tesla releasing its delivery and production numbers for the second quarter of this year. Tesla hit its 5000 Model 3 units/week goal but it wasn’t enough. The announcement of Gigafactory 3 being built in Shanghai seems enough to stabilize the company’s shares values. Recently, Musk also went to Thailand to deliver a miniature submarine for the rescue of the soccer team and their coach.