Tesla’s China factory is about to play an even bigger role in its global ambitions #Breaking112
The electric automaker will soon start exporting Chinese-made vehicles to Europe, Chinese state-run news outlet Xinhua reported Monday.
The company wants to start shipping Model 3 sedans from Shanghai as early as next week to Germany, Italy and Switzerland, among other destinations, according to Xinhua.
“Exporting to Europe means the quality of made-in-China Model 3 sedans has been recognized by the European market,” Xinhua quoted him as saying.
A ‘template for future growth’
The company has told shareholders that the facility was about 65% cheaper to build than its Model 3 production plant in the United States. And it is significantly less expensive to build a Model 3 in China than America, said Sofya Bakhta, a marketing strategy analyst at Daxue Consulting, a Chinese research firm.
“Compared with the American version, the production cost of the Chinese Tesla Model 3 has dropped by 20% [to] 28%,” she estimated.
Labor costs alone are considerably lower in China than in the United States, noted Le.
Wedbush Securities analyst Daniel Ives said that Tesla’s continued operations in China remain “the linchpin to [its] production and distribution.”
“Tesla is using this as a strategic advantage to go after other regions and pockets of Europe,” he said.
In a research note Sunday, Wedbush predicted that the company’s “shining [Gigafactory] success in China” would help it deliver better-than-expected earnings this week.
Meanwhile, the Chinese auto market is predicted to become even more critical in the coming years. “Ultimately, we see China representing 40%+ of global sales for the company potentially by early 2022,” Wedbush analysts wrote.
Tesla was also the first foreign automaker to be allowed to open a factory in the country without a Chinese partner, putting pressure on local players. Later, the company won a tax break for some of its cars, which helped make its prices more attractive to customers.
“The Shanghai Gigafactory not having any significant issues really allows [Musk] to keep his foot on the gas,” said Le, who added that because the factory’s construction happened “quickly and seamlessly,” there’s more pressure on other cities to accommodate Tesla’s expansion plans.
But the decision to export its Chinese-made cars also signals a shift away from the company’s original intention to use the factory for local supply, according to Le.
This decision could suggest that there is increased demand in Europe, or “less demand in China,” he said.
But “if 100% of their volume could be consumed domestically, then I’m pretty certain that they would sell it into China,” Le said.