Tesla Begins Taking Orders on Its Cheaper China-Built Model 3s
May 31 2019 - 6:45AM
Dow Jones News
By Trefor Moss
SHANGHAI-- Tesla Inc. promised to start delivering Model 3
sedans built at its new Shanghai plant within six to 10 months--and
priced them well below U.S. imports--as the electric-vehicle maker
races to capitalize on booming Chinese demand.
Offering up details on its China strategy, Tesla said prices for
the locally built Model 3 will start from about $47,500 for the
Standard Range Plus version. That is a significant discount on the
$58,900 Chinese buyers currently pay for a basic Model 3 imported
from the U.S.
The company is starting to take orders for the local Model 3,
and the first Shanghai-built cars are scheduled for delivery late
this year or early next year, the company said in a post on its
social media account.
Getting China right, said industry analysts, is pivotal for
Tesla, whose share price has halved in the past six months amid
doubts about its ability to ramp up deliveries in the U.S.
"Tesla has struggled with the Model 3 launch," said Bill Russo,
founder of Shanghai-based consulting firm Automobility. "A repeat
of this in China would put their timing at risk and place further
stress on their cash flow."
Tesla broke ground on its Shanghai factory in January. The
buildings' exteriors appear to be nearing completion, judging by
recent images posted on Twitter by local Tesla enthusiasts who have
been monitoring activity at the site. At a launch ceremony at the
start of the year, Tesla Chief Executive Elon Musk said the plant
could start production this year and reach volume in 2020. Friday's
announced delivery dates for the Model 3 suggests the company is on
track to meet that timetable.
Sticking to that schedule would enable Tesla to tap into
lucrative subsidies for electric vehicles before the government
cancels them by the end of next year. Under the existing program, a
Model 3 manufactured in China would qualify for a subsidy of about
$3,600, potentially allowing Tesla to lower its sticker prices.
While the overall Chinese auto industry is experiencing a slump,
with sales falling last year for the first time since 1990, sales
of EVs are surging, and the premium segment in which Tesla operates
is also growing. That gives Tesla, which already enjoys significant
brand cachet in China, a good chance of transforming itself from
the niche player it is today.
"Tesla is coming into a good segment with a brand that is rooted
as a leader in the EV sector," said Mr. Russo, who said Tesla was
right to commit fully to China.
In gearing up for local production, Tesla has started a
full-throttled recruitment drive. Organizers said an event on
Wednesday, in eastern Shanghai close to the new factory, drew 4,000
applicants. One applicant was a former assembly-line worker for
General Motors Co. in Shanghai who voiced confidence in Tesla's
prospects. "I hope to retire at Tesla," said 28-year-old Zhang
Cong.
Tesla ultimately plans to build 500,000 vehicles a year at the
Shanghai facility--a massive step up from the 16,360 imported
vehicles it sold in China last year, according to auto-intelligence
firm LMC Automotive.
Trade tensions between Washington and Beijing were factored into
Tesla's China plans. Beijing dropped a longstanding requirement
that foreign car makers form joint ventures with Chinese partners,
a policy that had been criticized by the U.S. But Beijing also
raised tariffs on imported cars from the U.S. in retaliation for
levies imposed on Chinese goods by Washington.
The new ownership rules and the higher tariffs gave Tesla reason
to accelerate plans for a China factory. But the higher tariffs
also brought it troubles. After raising prices to reflect the new
tariffs, it later slashed them, drawing a backlash from recent
buyers who weren't offered refunds.
Operating alone means Tesla can retain all the profits from its
local operation, rather than sharing them with a joint-venture
partner, though it must also shoulder all the political and
financial risks associated with the project.
Chunying Zhang in Shanghai contributed to this article
Write to Trefor Moss at Trefor.Moss@wsj.com
(END) Dow Jones Newswires
May 31, 2019 06:30 ET (10:30 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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