China is a rapidly growing market for electric cars, and Tesla is setting its sights on China to capitalize on this. The Chinese government expects new energy vehicle output to cross the 2 million mark by the year 2020, with sales expected to rise to 7 million units by 2025, which will constitute a 20% market share of the automobile industry at that time.
Tesla is rushing to make a manufacturing plant in China to serve the growing auto market. Tesla will face some stiff competition in the Chinese market as electric car giants such as BYD and NIO will not let Tesla to simply walk over them.
At the moment, Tesla is only manufacturing the Model 3 for delivery to the Chinese and European markets, but the long delays in shipment and the increasing costs mean that the Model 3 is much more expensive than the other electric cars in the Chinese market.
Tesla is betting big on the Chinese auto market, and as its Shanghai-based Gigafactory aims to get ready by the end of this year, the executives at Tesla are exploring options to open a car manufacturing plant in China to serve the growing market of electric cars.
China has seen a sharp rise in demand for electric vehicles, which is much higher than other parts of the world, and it has already conquered 4 percent of the auto market in China. This growth was possible due to subsidies from the Chinese government and policy support which allowed Chinese car manufacturers to secure tax breaks and low-interest loans to set up their factories.
Tesla aims to make use of these subsidies before it goes away in China. To serve that goal, they have already started construction of their Shanghai Gigafactory. They are building the factory on land which was secured from the Chinese government on a 50-year lease, and the company is looking to pump $500 million into the company in order to start operations by the end of 2019.
Some of the major banks in China are already interested to finance this massive undertaking by Tesla, and with the policy support and other incentives from the government, Tesla could use all that support to compete against the other bigger companies in that region.
Tesla’s Gigafactory could churn out 3000 battery packs a week with peak capacity. These high-energy density battery cells could power Tesla cars as well as supply energy to the main grid. This factory will help to lower the costs of the imported Tesla Model 3 cars which have risen in price due to import duties, transport costs as well as higher costs of labor.
Once Tesla branded cars become more affordable in the Chinese market, people will start buying them like hotcakes as the demand continues to increase at a steady pace. Elon Musk, the CEO of Tesla, hopes to take advantage of the warm relations with the Chinese government to make a serious dent in the auto industry of that region.