Tesla CEO Elon Musk surprised Wall Street when he disclosed that his company is planning to build and deliver 500,000 cars per annum by 2018. New revelations that have emerged since then explain how the CEO is planning to deliver so many cars so soon and 1 million cars in 2020. Musk looks intent on breaking into the Asia-Pacific market to push growth.
Tesla to start local production?
In 2014, the U.S. firm started making inroads into the Asia-Pacific region by selling its cars in China. The automaker has not hit the expected success in the country so far, but 0% interest financing deals and the presence of a local manufacturing plant could increase sales in the country.
Tesla’s Fremont, Calif. plant might not be able to produce 500,000 electric vehicles a year, so the target appears a bit unrealistic. For example, when the factory was a JV between GM and Toyota, it had a maximum production of 428,000 units. Making 500,000 cars from the Fremont factory in the next two years might be a challenge as the automaker is still in the process of retooling that factory to build electric cars.
But recent news from China says the electric car maker is in talks with state-owned Jinqiao Group to build a production facility in Shanghai. According to the reports, Tesla’s CEO is ready to invest around $9 billion to set up a local manufacturing presence in China. As per the MOU signed with Shanghai, both parties would invest about $6.12 billion (30 billion Yuan) each to set up the factory. Jinqiao will provide land as part of its investment. Further, the U.S. firm is reported to be in discussions with the Chinese cities of Suzhou and Hefei on the possibility of opening a factory in either city.
The presence of a local manufacturing facility in China would make it easier for the automaker to compete with local Chinese automakers on price. Currently, a 25% tax is charged by China on imported cars, making Tesla’s EVs much more expensive than cars produced locally.
0% interest rate and 0 yuan down payment in China
For buyers in China, the automaker has also launched a 0% interest rate financing and zero down payment program. The finance program will help the U.S. firm compete effectively with its Chinese competitors and hopefully increase sales of its EVs in the country. Tesla will be working with Fosun, a Chinese financial service firm, to offer financing to Model S buyers.
Buyers can get the 0% interest rate on a one-year financing program. However, they will pay 2% interest on the two-year financing program, and a 6% rate applies to the three-year financing program. Buyers can also finance the Model S 75 without any down payment.