Tesla Plans A Second Assembly Plant In Shanghai

Tesla only has one assembly plant in Fremont, California. But that could be changing in the near future.

Yesterday, Tesla and the and the Shanghai government reached a preliminary deal for a new assembly plant. The automaker expects production in about three year's time, provided they can get the approvals and permits needed. Tesla says the plant could build up to 500,000 vehicles annually. According to Bloomberg, the plant is expected to build the Model 3 sedan and upcoming Model Y crossover.

Tesla building a plant in China doesn't come as surprise. The country is the largest market for electric vehicles, and most forecasters believe sales will skyrocket as government regulations push toward a goal of 100 percent electric vehicles by 2030.

There are some questions about this new factory. For one, how is Tesla going to pay for this new plant? At the end of the first quarter, the company burned through $2.7 billion, mostly due to various issues dealing with ramping up Model 3 production. The Shanghai government said it would help cover some of capital costs.

The other is will Tesla need to share technologies with a Chinese partner. Currently, any foreign automaker has to enter into a joint venture with a Chinese automaker and transfer various technologies.

"For technology transfer, it is a matter subject to negotiation between the enterprises," said Huang Ou, deputy head of the Shanghai government’s economy and information technology commission.

The Chinese government announced back in May that it would scrap the rules for "capping foreign ownership of new-energy vehicle ventures" by 2022.

Source: Bloomberg, Reuters