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Tesla makes headway in opening its China Gigafactory
Tesla Inc., the No. 1 electric carmaker in the US, has set up a new company in Shanghai focusing on R&D with a registered capital of 100 million yuan, in a clear sign the carmaker is expediting its local manufacturing plans in the world's biggest new energy vehicle market after the Chinese government announced to lift its cap on foreign ownership of NEV ventures.

Tesla (Shanghai) Co, specializing in the research and development of electric cars, spare parts, and batteries, was registered on May 10, according to a filing with the National Enterprise Credit Information Publicity System.

It's clear car manufacturing is not included in the new company's business scope at present, although several Chinese media quoted as saying Tesla had kicked off its Gigafactory project in Shanghai, after being confirmed it'll be able to fully control its manufacturing in China after the policy change.

At the beginning of the month, Tesla Inc. released its Q1 earnings' report, with its CEO Elon Musk indicating that news about the company's Gigafactory in China may be released in Q2, or in Q4 at the latest. This is the first relevant message delivered by Tesla after China allowed foreign NEV manufacturers to open fully owned factories in China.

“It will take about two years to build a car-manufacturing factory in China. If Tesla has decided to have a China factory, the design plan for it must be released in the second half of 2018, which accords with what Musk has said,” quoted a popular self-media commentary in the auto industry as saying.

Rumors about the US electric car leader having its cars built in China started to spread as early as 2014. Until last June, it was widely reported the company had been in talks with the Shanghai municipal government but could not make a deal because of disagreements on the ownership structure. Elon Musk even complained the project might take a total of three years' time to start.

Low production capacity has long crippled the technology company while Tesla's China factory may serve as a solution to the standoff. The Street, a US-based finance media previously made a bold prediction that Apple Inc. may acquire Tesla's car-making operations in the near future, considering it has been struggling with insufficient productivity and financing problems.

Apple Inc has reportedly looked into the company's business at two different times in the past. And despite the big difference in making cell phones and cars, Apple has always placed high value on creativity and it is capable of helping Tesla bolster its production capacity with its strengths in technology and capital. The Street believes Apple is interested in capitalizing on the auto technology forerunner's future prospects.

In 2017, Tesla delivered a total of 103,000 vehicles including 1,700 units of the popular Model 3, which is indicative of its deficiency in annual production. The company recently released its 2018 promotional video, showcasing flagship products and factories around the world. A new car model believed to be Model Y is expected to be put into production by 2020.

Being an entry-level SUV, Model Y is said to be capable of generating more orders than the Model 3, putting more pressure on the company's production capacity. Analysts suggest low output is forcing the company to streamline its production process.
Besides production capacity issues, it's believed the ever-growing significance of the China market is also a factor behind the company’s push to produce locally to avoid steep import tariffs and bring down unusually high prices for Chinese consumers.

China has become a significant market for the US-based electric carmaker, according to Chinese media reports. In 2016, its sales revenue in China amounted to $1 billion, while in 2017, the figure shot up to $2 billion, only next to what the company had accomplished in its home market. Sales in China now account for 20 percent of its global total.

It's analyzed by industry insiders in China that Model 3 and Model Y would especially gain popularity in China, satisfying their needs. So, there is bigger chance the two models would be the first to be churned out in its proposed Gigafactory in China.

It's reported by Chinese media that the US company had previously done field trips to Shanghai and Suzhou in East China's Jiangsu province and Hefei, the capital city of Anhui province, for choosing the best site for building the Gigafactory.

In mid-March, Shanghai authorities had indicated the city government would bolster the development of NEV industries and that Tesla Inc. agreed with the preferential policies and investment environment in the city.

The government also said it had kept close contact with the inarguably most competitive NEV carmaker in the world for further exploring its development plans in China. However, till now, there is no specific information about its potential Shanghai factory.

It's reported by the South China Morning Post that China's central government has set an ambitious target, whereby new-energy vehicles will account for a fifth of total sales by 2025.

China has been actively promoting new-energy vehicle development over the past two years as its government is adamant on cutting vehicle emissions and reducing air pollution.

The central government is widely reported to have been handing out subsidies to NEV buyers, while some local governments distribute free license plates to raise the popularity of environment-friendly cars.


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