Tesla Motors Inc To Choose Shanghai For China Production

Tesla stockBlomst / Pixabay

Tesla is eyeing Shanghai as the front-runner to become its production base in China. Bloomberg, citing a person with knowledge of the matter, says Tesla’s investment in Shanghai may be valued at about $9 billion. The report also says that Jinqiao Group has signed a non-binding memorandum of understanding with the automaker on building its production facilities in municipalities.

A major win for Tesla and Shanghai

Tesla’s investment of $9 billion would be larger than Walt Disney Co’s $5.5 billion Shanghai theme park. Citing the source, the report further said that each party may invest about 30 billion yuan ($4.5 billion) in the partnership, with Shanghai-based Jinquio Group putting up land for most of its share. Steve Man, an auto analyst with Bloomberg Intelligence, said this would be a major win for the U.S. firm and Shanghai.

“The investment will probably include a nationwide dealership network, superchargers, R&D center and potentially a second ‘Gigafactory,”’ the analyst said.

Manufacturing in China would allow the California-based automaker to avoid a 25% import levy, thus making its electric cars more competitive against local offerings by BAIC Motor, BYD Co and luxury-brand competitors like Audi and BMW.CEO Elon Musk hinted at building a factory in the country in the past.

In October, Musk said, “Model 3 is due in [approximately] 2 years. A China factory for local demand could be as soon as a year after.”

Shanghai: a hub for auto manufacturing

Shanghai is one of the major auto manufacturing hubs in China, along with being a financial center and a sea port. Also, the city is home to SAIC Motor, which has joint ventures with Volkswagen AG and General Motors.

Foreign automakers that want to set up manufacturing plants in China have to do so through joint ventures, in which they can own up to a 50% stake. Hyundai Motor partnered with BAIC Group in Beijing, Ford Motor is working with Changan Group in the southwestern municipality of Chongqing, and Nissan Motor’s China venture is based in Wuhan in central Hubei province.

Different cities and provinces fight for investments that create jobs and ignite the local economy. Hefei and Suzhou are among the cities besides Shanghai that are actively seeking to win the investment from the electric car maker, the report said.

Tesla does not comment on rumor and speculation, said Khobi Brooklyn, a Tesla spokeswoman. Also there has been no comments from Jinqiao Group on the matter.

On Monday, Tesla shares closed up 1.96% at $219.70. Year to date, the stock is down almost 8%, while in the last year, it is down by over 16%.

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About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com

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