Better times are here: Tesla wants to quadruple its manufacturing capacity in China
The existing Gigafactory in Shanghai will be expanded later this year with a second factory built next to it, after which Tesla will be able to produce 2 million electric vehicles a year in China.
Last spring, we reported from Reuters that Tesla was pessimistic about its development plans in China due to reputational losses, volatile sales, and the ongoing trade war between the US and China, which limited the company’s export potential.Shanghai Gigafactory. Now the same agency, citing its own anonymous sources, reports that plans have changed: Tesla wants not only to increase the capacity of the existing Gigafactory in China, but also to build a second one.
Tesla opened a Gigafactory in Shanghai at the end of 2019, it was built with a capacity of 450,000 vehicles per year with the prospect of expanding to a million, the Model 3 platform sedan and Model Y crossover now being produced here were weak to Tesla in terms of sales in China: According to CarSalesBase, 135,449 vehicles were sold, far short of the company’s capacity. But, firstly, Tesla quickly organized the supply of Chinese-assembled cars to Europe, and secondly, the complaints of Chinese consumers were quickly forgotten and in 2021 they already bought 473,103 Tesla electric vehicles. In general, plans to expand the Gigafactory have become relevant again.
Reuters reports that the increase in production at the existing Gigfactory will begin in the very near future, and by the end of the year the plant will have a capacity of about a million cars a year. A second plant will be built nearby, the project for its construction is currently being approved, the amount of investment and the launch date are still unknown, but after the launch, Tesla will be able to produce up to 2 million cars a year in China. The volume of exports will depend on demand in China itself.
In Europe, due to bureaucratic delays, Tesla cannot yet launch a Gigafactory in the suburbs of Berlin with a capacity of 500,000 cars per year, although its construction will be completed in the fall of 2021. This year, the Berlin Gigafactory will smoothly start, and then the need for Chinese-assembled cars will decrease, but Tesla, apparently, is counting on continued growth in sales in China itself, and in the long term, the capacity of the Berlin Gigafactory may not be enough either. Tesla’s experience has shown that it is easier and cheaper to build factories in China than in Europe, so it is unlikely that Tesla will decide on another European plant and receive from China the volume of cars needed by the European market.
In addition, Tesla has a new Gigafactory in Texas (in the city of Austin), but it is mainly focused on the US market and future models for it. However, as it became known in January, Tesla will not introduce new models this year. Tesla’s entry into the Russian market, announced last year by Elon Musk, never took place. And this is unlikely to happen in the context of recent geopolitical events.