[ad_1]
Tesla (TSLA) is about to produce Tesla Model 3 manufactured in China through its China Gigafactory, also known as Gigafactory 3. It has been comprehensively accepted by the Chinese authorities. Before discussing this in detail, let's see how Tesla's Gigafactory 3 production will help solve some of its problems, including higher commercial warfare rates and higher production costs.
Tesla moves away from the trade war
Tesla is trying to get out of the US-China trade war by speeding up the construction of its Gigafactory 3. The company had to adjust its car prices in China several times over the last few years due to uncertainty of the trade war . More recently, on August 29th, Tesla increased its car prices in China due to the uncertainty related to the Chinese yuan.
Other US and foreign manufacturers are also struggling to operate successfully in China in the face of rising trade tensions and weakening demand. In 2018, Ford (F) sales in China fell by 14.3% year on year (yoy), while those of General Motors (GM) fell by 9.8%. This year, their sales and profitability have not been better.
Tesla is trying to avoid higher tariffs in China with its Gigafactory 3
Tesla, however, tries to avoid pricing issues via its China Gigafactory. In this plant near Shanghai, Tesla is expected to start producing Tesla Model 3 in the fourth quarter. This local production should benefit Tesla in two main ways.
First, the cost of producing Tesla Model 3 in China is expected to be much lower than that of the United States. Second, Tesla will be able to avoid customs duties on the import of these vehicles in China. Currently, Tesla imports all vehicles sold in China. Investors should note, however, that other models of the company will still be imported and subject to customs duties. We detailed Tesla's plans for his Gigafactory China in Tesla's Gigafactory China could it be his secret weapon?
Financial advantage of production in China compared to the United States
Last year, Tesla said "operating at a cost disadvantage of between 55% and 60% compared to the same vehicle manufactured in China". The company expects its manufacturing costs in China to be lower as it has optimized and learned from its experience. in American manufacturing. Labor and supply costs are also lower in China than in the United States. In addition, the Gigafactory 3 should be more efficient than the Tesla facilities in Fremont.
As reported by Teslarati, Tesla will assemble the vehicle, produce batteries and drive units to a Gigafactory 3 site. In comparison, the same process is shared between its facilities in Fremont and Nevada in the United States . This process should also improve the efficiency of the company.
Progress at China Gigafactory 3
The progress of the Tesla Gigafactory 3 has been impressive. Tesla signed a cooperation agreement with the Chinese authorities for the construction of Gigafactories in July 2018. She obtained the land for the plant in October 2018. In January 2019, she began construction. By the end of just eight months, Tesla had increased its facilities to a level that left analysts and Tesla bears surprised. On August 19th, Gigafactory 3 received its first complete certificate. In a record, the company received the certificate within three days of its request.
The Tesla Gigafactory 3 has been well received
Now, the factory has taken a new step. According to Beijing News Finance, September 12, Tesla held a meeting regarding phase I of its Super Factory project. During this meeting, the Gigafactory 3 has been widely accepted. As part of this process, "Each business line has verified and accepted the project site, as well as the relevant building materials on the site and agreed to pass successfully." This acceptance brings the plant closer to the production of the fabricated model in China. 3s.
One more step towards the deployment of models 3 made in China
According to Teslarati, with the Phase 1 inspections completed, Tesla could soon start model 3 production runs. The 10% tax exemption in China is another benefit that can be benefit Tesla via Gigafactory 3. According to CNN, 34 automakers are exempt from this tax. The exemptions, however, mainly concern cars manufactured in joint ventures involving Chinese and foreign manufacturers. Tesla is the only company abroad to have received it. We discussed this subject in more detail in China. What Trump did not do for Tesla.
Production will increase in favor of Tesla
Along with this exemption and the national roll-out of models 3, the cost of ownership of Tesla's cars is expected to drop significantly in China. This decrease should help the company achieve its volume and margin targets in the country. Market watchers have long rejected the potential of Tesla's Gigafactory 3. However, with its impressive rise, the market may have to give Tesla the credit it needed.
[ad_2]
Source link