Tesla buys site for Chinese Gigafactory

2018 Tesla Model 3 Long Range electric car, road test in greater Atlanta area, Feb 2018

2018 Tesla Model 3 Long Range electric car, road test in greater Atlanta area, Feb 2018

As Tesla moves forward with plans to build electric cars in China, the automaker has secured land in the country for one of its so-called Gigafactories.

Reuters reported Wednesday that Tesla has signed an agreement with the Shanghai government for an 860,000-square meter plot of land for the new site, which represents a major step for Tesla’s Chinese production strategy.

Tesla itself didn’t disclose how much it paid for the land, but the Shanghai Bureau of Planning and Land Resources said the site was sold at auction for $ 140.5 million.

Tesla CEO Elon Musk (r.) and Shanghai Mayor Ying Yong in Shanghai July 10, 2018

Tesla CEO Elon Musk (r.) and Shanghai Mayor Ying Yong in Shanghai July 10, 2018

Today, Tesla’s cars are subject to import tariffs which have grown harsher amid an escalating U.S.-China trade war. Building electric cars locally will lower the price of Teslas in China, which is the largest auto market in the world, and more crucially, the largest market for electrified vehicles. Tesla first officially revealed plans for a Chinese facility in July.

New Chinese regulations will also allow Tesla to wholly own its operations in the country. China plans to scrap all ownership limits on foreign automakers by 2022, though restrictions will start to be lifted this year with the cap lifted on any foreign-invested shares in electric and hybrid car production. With the new rule, Tesla doesn’t need a local company to set up a joint venture. CEO Elon Musk has long been wary about establishing a joint venture with a local company.

When the new Tesla factory does open, it will have the capability to build 500,000 cars per year. The electric car manufacturer also previously said the Chinese plant will not affect U.S. production at its car plant in California, or its battery plant in Nevada. Producing cars in China will tap into a grand market for Tesla. This year, sales of so-called New Energy Vehicles, which include both hybrids and electric cars, have grown 81.1 percent in China through the first nine months.

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