SHANGHAI -- Electric-car maker Tesla Inc. says it has hit its
early production target of 1,000 vehicles a week at its China plant
-- less than a year after breaking ground at a 210-acre field in
Shanghai.
Song Gang, who oversees the production at the factory, said
Monday that Tesla can now produce 28 vehicles or more an hour and
that it has a 10-hour workday at the Shanghai plant. Mr. Song spoke
at an event where Tesla delivered 15 of its first made-in-China
Model 3 sedans to customers, all Tesla employees. The company is
set to start larger scale delivery next month, another executive
said.
The success of the Chinese plant -- known as Gigafactory
Shanghai -- is crucial for the Silicon Valley-based car maker led
by Elon Musk, who is betting big on the world's biggest automotive
market. Tesla grappled with Model 3 production at its Fremont,
Calif., plant after the car was launched in 2017.
"We can't show you every detail of our hard work. But what we
can show is the result," Tesla Global Vice President Tao Lin said
at Monday's event. "Every made-in-China Model 3 running on the
street proves our daily efforts are worthwhile."
Producing cars in China for the local market allows Tesla to cut
back on shipping costs and avoid import duties. In April, Mr. Musk
said Tesla's production in China could hit 1,000 to 2,000 vehicles
a week.
While car manufacturing is key, Tesla must also develop a
comprehensive sales, services and charging ecosystem that supports
the growing fleet of cars it is building, analysts say. "Getting
past that 1,000 is just one of the many things," said Tu Le, who
heads Beijing-based consulting firm Sino Auto Insights. For it to
be a "successful launch," he added, "all these things need to have
the boxes checked."
Tesla now has 36 retail stores in China and about 300 charging
stations nationwide. It plans to increase its after-sales staff in
the country to about 1,500 people in 2020 from around 600 now, an
executive said at the event.
A made-in-China Model 3 costs 355,800 yuan ($50,844), but each
car is eligible for a subsidy of around 25,000 yuan and is exempt
from a 10% purchase tax. The imported Model 3 in China, which has a
longer range, costs 439,900 yuan ($62,861) while in the U.S. the
sedan costs $39,990. U.S. buyers are currently eligible for various
incentives including $1,875 federal tax credit.
Tesla still relies on costly imported components to make its
Model 3 in China. About 30% of its supply chain is now local and
Tesla is aiming to fully localize its supply chain by the end of
2020, Mr. Song said.
Ultimately, Tesla plans to build 500,000 vehicles a year in
Shanghai. It sold 16,360 imported vehicles in China last year,
according to LMC Automotive. Tesla doesn't disclose how many
vehicles it sells in China.
As Tesla ramps up production in China, electric-vehicle sales in
the country have been rapidly cooling since the government reduced
most subsidies at the end of June. Sales of new-energy vehicles
dropped for the fifth consecutive month, by 43.7% to 95,000
vehicles, in November. The remaining national subsidies are set to
be eliminated by the end of 2020.
Gigafactory Shanghai is the first wholly foreign-owned car plant
in China, which is liberalizing its rules around foreign ownership
in its automotive industry. Analysts say Tesla's presence in
Shanghai is important for China, because it showcases the
government's efforts to opening up to foreign players and that it
can attract foreign tech firms despite a slowing economy.
Last week, Tesla said in a filing that a syndicate of lenders in
China has agreed to provide up to 11.25 billion yuan for the
Shanghai plant. That includes loans of up to 9 billion yuan,
secured on the land and buildings at the plant and which it can use
for up to three years, and a one-year 2.25 billion yuan unsecured
revolving credit facility. Tesla can borrow in either yuan or
dollars under both facilities.
The terms of the loans are favorable to Tesla, the filing
suggests. The interest rates on the yuan loans are below the
Chinese central bank's rate, while the dollar-denominated loans are
priced at 1.3% and 0.8% higher than the London interbank offered
rate. U.S. dollar Libor for 12 months is currently about 2%,
FactSet data shows.
The lenders are China Construction Bank Corp., Agricultural Bank
of China Ltd., Industrial and Commercial Bank of China Ltd. and
Shanghai Pudong Development Bank Co.
After months of difficulties that hurt investor confidence --
including challenges in building and delivering the Model 3 and
investigations by the Securities and Exchange Commission over Mr.
Musk's tweets that were later settled -- investor enthusiasm for
Tesla is on the rise again.
The company's stock passed the $420 mark on Dec. 23 -- a
symbolic threshold because it was the price at which Mr. Musk last
year said he wanted to take the company private -- and closed
Friday at $430.38.
--Yin Yijun, Raffaele Huang and Yoko Kubota
(END) Dow Jones Newswires
December 30, 2019 09:17 ET (14:17 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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