Tesla Inc is set to deliver China-built cars on Monday, a significant milestone for Elon Musk’s company as it broadens in the world’s largest electric-vehicle market.
The first 15 units of Model 3 sedans created at Tesla’s new multi-billion-dollar Shanghai plant are set to be delivered to company workers on December 30, capping several months of victories for Musk. The latest came Friday when the locally constructed car was included on a list of vehicles eligible for an exemption from a 10% purchase tax in China.
The Shanghai plant is the first plant of Tesla that is built outside the US.
The shares closed slightly modified at $430.38 on Friday. The stock has boosted since the automaker reported a surprise profit on October 23, and is now double its year low of $178.93 in June.
CEO Musk is counting on the China plant to help build on the latest momentum for the company in the world’s largest market both for electric vehicles and autos in general. The Model 3 will rival with electric cars from regional competitors such as NIO Inc. and Xpeng Motors and also global manufacturers including BMW AG and Daimler AG.
The Shanghai Gigafactory broke ground at the beginning of 2019. Originally just a muddy plot about a 90-minute drive away from Shanghai’s city center, it is now an important test of Musk’s bid to keep his automaker profitable as he bets big on Chinese appetite for electric vehicles.
With Tesla’s volatile stock price and strained finances, investors are going to watch closely how the ramp-up unfolds. The multibillion-dollar investment will be a deciding factor to figure out whether Tesla will be able to take on local rivals and fend off challenges by the likes of Mercedes-Benz, BMW, and Audi.
Junheng Li, an expert at JL Warren in New York, noted that the made-in-China Model 3s are not wholly manufactured there yet. The automaker is importing parts and assembling them at the center near Shanghai, with production localization expected later in 2020.
“Localization of suppliers has been very slow,” stated Li in an email Friday. Tesla didn’t immediately reply to an inquiry seeking comment.
Although Musk has said he’s never observed a factory constructed this quickly, the first delivery will come only a day before the end of this year. Back in April, the Musk had predicted that Tesla would make at least 1,000 cars a week in Shanghai by the end of the year — a volume the company’s factory in California spent months attempting to hit. He also stated that a weekly rate of 3,000 is a target at some point.
Tesla said in October the locally constructed Model 3 will start its cost from $50,000. On top of the tax exemption announced Friday, the China-built model this month was eligible for a government subsidy of as much as about 25,000 yuan ($3,600) every vehicle.
The company may reduce the price of the locally-assembled sedans by 20% or more in 2020 as it starts using more regional components and decreases costs, people knowledgeable with the matter have said.
The launch will also give us enough clues about Tesla’s ability to truly go global. The company is also preparing to follow up with a production facility in Europe.