Tesla Plans To Build Massive Chinese Factory Amidst Budding Trade War With U.S.

As reported by Bloomberg, it appears that American electric vehicle manufacturer Tesla is planning to build a massive new factory in China, with hopes of boosting production numbers significantly.

According to reports, this new factory will most likely have a production capacity of 500,000 vehicles a year, after two to three years of full functionality. This would, if successful, contribute a matching if not exceeding production number to its United States counterpart factory, which was supposed to be on track to produce 500,000 vehicles a year but has been slowed due to Model 3 production.

Tesla's only automotive assembly plant currently is in Fremont, California, where it's constructed roughly 88,000 cars during the first half of this year. Aside from this, the manufacturer also owns a gigantic battery factory in the nearby Nevada desert. With the plans looking as if they will come to fruition for the auto maker's move into China, which is the world's largest market for electric vehicles, Tesla has also revealed that it eventually plans to begin working toward building a factory in Europe as well by the end of 2018.

The cutting-edge auto manufacturer is set to sign a memorandum of understanding for the project with local entities in Shanghai, according to Bloomberg, citing unnamed people familiar with the matter. The South China Morning Post reported that Tesla had already signed an agreement to set up the new factory in Lingang New City.

Company CEO Elon Musk was also reportedly in the city on Tuesday, furthering assumptions that the plans are moving forward on course.

These same reports have also stated that the new Chinese factory will most likely only be used to produce the entry-level Model 3, as well as a new project that the automotive creators are working on, the Model Y, a fully-electric crossover vehicle that would most likely be a mash of the Model 3 and their full-sized SUV, the Model X.

Tesla's Model 3 can now park itself and open garage doors with new Summon feature.
AP Images | David Zalubowski
Tesla's Model 3 can now park itself and open garage doors with new Summon feature.

However, the new agreement and potential factory-building come amongst a high-stakes budding trade war between the United States and China.

The hostility in trading recently between the two superpowers, brought on by the Donald Trump Administration, has caused numerous companies, including Tesla, to look for alternative production means and avoid trade-tariffs imposed by the president. Motorcycle manufacturer Harley Davidson has also expressed an interest in following the same mantra as Tesla to circumvent heavy import/export fees with China, which is the home to a large consumer base for both individual companies.

A statement issued by the Shanghai government confirmed the plans, stating "We are delighted to have a strategic partnership with Tesla, and we welcome the development, manufacture, and sale of pure electric vehicles in Shanghai."

Tesla spokespeople claim that the factory will be up and running within two years and be at full production capacity subsequently two years after that. They have also maintained that the construction and implementation of this new means of manufacturing will not inhibit production in the United States, whatsoever. In fact, Tesla still plans on growing the output numbers of its home factory so that it will meet that of its new China factory's proposed output.