Elon Musk starts work on his $2billion Tesla ‘Gigafactory’ in China

Elon Musk starts work on his $2billion Tesla ‘Gigafactory’ in China

The country's auto market is expected to have shrunk past year for the first time in decades but demand for electric vehicles remains strong.

"Affordable cars must be made on same continent as customers", Musk said in another tweet.

Analysts have said production in China would allow Tesla to avoid such tariffs, which already have caused a spike in the price of the cars that Tesla now imports to the Chinese market. The "gigafactory" also will produce Tesla's proposed Model Y vehicle, which will be launched this year.

Aiming at reinforcing its presence in the world's largest market for electric cars, Tesla brought its Model S, Model X and Model 3 to the China International Import Expo held in November 2018 at Shanghai.

China is the world's largest auto and NEV market, with Beijing aspiring to become the global NEV leader with technologies that meet the highest worldwide standards by 2025.

As a USA -made vehicle, Tesla's cars in China have been subject to steep tariffs, and sales have suffered from the U.S. The lower rate will last until the end of March pending trade talks.

The automaker has said it aims to initially produce about 3,000 Model 3 vehicles per week at the plant and localise its manufacturing and supply chain.

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With the ownership restriction removed, Tesla became the first foreign carmaker to set up a wholly-owned new-energy vehicle (NEV) factory in the mainland.

Having control isn't likely to free Tesla from China's onerous bureaucracy nor safeguard its intellectual property, Mr. Russo warned.

Tesla has been pushing forward its plans for the 500,000 vehicle capacity plant after it secured a site in October, hiring staff, starting procurement for building materials and setting up a local financial leasing company.

Shares in Chinese suppliers to Tesla, including Tianjin Motor Dies and VT Industrial Technology, rallied on Monday after Musk's comments.

Musk had hinted recently at an upcoming Shanghai trip to break ground for the plant but Monday's event was not publicly announced until the Tesla CEO broke the news in a series of tweets earlier in the day. The two sides have called a truce in their trade fight and are engaged in talks to cool tensions, with China temporarily scrapping a retaliatory 25 percent tariff on USA -made cars starting January 1.

China is the largest market for electric vehicles, and most forecasters predict EV sales in the country will accelerate rapidly as the government drives toward a goal of 100 per cent electric vehicles by 2030.

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