Luxury electric car manufacturer, Tesla, secures 210 acres of land in Shanghai, China for a planned factory. In the past, American business looking for opportunity to produce in China, have to go into a 50-50 joint venture with a local factory to start production in their country.
Though recently, Chinese president Xi Jinping has announced that they will be phasing out the requirements of a joint partnership for foreign manufactures looking to produce on their land.
Tesla will be one of the first beneficiaries of this ruling. The company has expressed that this new factory will be able to produce up to 500,00 electric vehicles a year. They have stated that the factory will be ready to produce vehicles in the next two years, and it will take another two to three years to reach full production standards reaching 500,000 vehicles.
Trade tensions between the US and China have caused a significant increase in tariffs for the car manufacturing company, reaching up to 40% for one car. Unlike other car companies like BMW, Ford, and GM, Tesla operates out of Fremont, CA.
The Chinese consumer is a coveted demographic for the car manufacturing company, and the company hopes that this will help them reach their audience more efficiently while avoiding any overhead cost.
Tesla Shares are around the lowest they have been all year, and its hard to ignore the fact that the company is struggling to make a profit at the moment as they are $1 billion dollars in debt to creditors. The question is, will they be able to start production and create profit enough to stay a float by the time their Gigafactory 3 is scheduled to be finished.