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Tesla Announces Plans to Build Giant Factory in China

Tesla Announces Plans to Build Giant Factory in China

Wednesday, 9 January, 2019 - 06:45
Tesla's Founder and CEO Elon Musk. Reuters file photo
Beijing - Asharq Al-Awsat
Tesla's Founder and CEO Elon Musk announced on Monday that the construction of an electric car factory in Shanghai would give the company a full access to the Chinese market, the world's largest car market.

"We are eager to begin the construction of the giant Tesla plant in Shanghai," Musk wrote on his official account on Twitter.

"My goal is to complete the construction this summer, to start producing model 3 by the end of the year and to achieve a huge production next year," he said.

Chinese media reported that the Tesla CEO will attend the launching ceremony in Shanghai. The announcement came in conjunction with the arrival of a US delegation in Beijing to reach an understanding that would end the trade war between the two countries.

In July, Tesla announced plans to establish a factory that could produce more than 500,000 cars per year in China -its first factory outside the United States- with the aim of directly accessing the country's electric car market without being affected by the China-US trade disputes.

Amid heavy tariff exchanges between the world's two biggest economic powers, Beijing targeted US cars and their auto parts during the summer. However, as part of a trade truce with the US, Beijing announced in December, the suspension of heavy fees on cars and spare parts imported from the United States.

Although rooted in China's domestic market, Tesla is expected to face stiff competition amid a slowing economic situation in the country. However, the electric car sector will continue to grow in China supported by the local government seeking to combat air pollution.

According to Bloomberg, the cost of the project is approximate $5 billion. Tesla said it would own the entire plant, although China usually requires foreign companies to establish local partnerships with profit sharing and technological know-how. A spokesman to Tesla declined to comment on the topic at the moment.

Earlier this week, Tesla requested the US to exempt a Chinese component used in one of its models from 25% of fees imposed in August. Tesla, and many other automakers including General Motors, are warning from rising production costs due to the US-China trade war. The Chinese electronic component used by Tesla in cars assembled in California, and for which it requested the exemption, makes part of $16-billion imports that were subject to 25% US protective tariffs in 2018.

In its request to the US government, Tesla said that it had been unable to find an alternative supplier that produces the component with the same specifications and quantities, and in the timeline set for the company's targeted growth.

Tesla calls the electronic component, the one it wants to be exempted from US fees, the "mind of the vehicle", and warns that its cooperation with another supplier would delay its production.

It also warned that relying on an alternative product exposes the quality to higher risks, which may affect the quality and the safety of the whole vehicle, along with the consumer's satisfaction with the final product.

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