Tesla Inc. Chief Executive Officer Elon Musk on Tuesday landed a deal with Chinese authorities to build a new auto plant in Shanghai, its first factory outside the United States, that would double the size of the electric car maker’s global manufacturing.
The deal was announced as Tesla raised prices on U.S.-made vehicles it sells in China to offset the cost of new tariffs imposed by the Chinese government in retaliation for U.S. President Donald Trump’s heavier duties on Chinese goods.
Mr. Musk was in Shanghai on Tuesday, and the Shanghai government said in a statement it welcomed Tesla’s move to invest not only in a new factory in the city, a centre of the Chinese auto industry, but in research and development as well. China has long pushed to capture more of the talent and capital invested by global automakers in advanced electric vehicle technology.
Tesla plans to produce the first cars about two years after construction begins on its Shanghai factory, ramping up to as many as 5 lakh vehicles a year about two to three years later, the company said. That would make Tesla’s Shanghai plant large by auto industry standards, where most factories are tooled to build 2 lakh to 3 lakh vehicles a year, and roughly equivalent to the planned annual production at Tesla’s plant in Fremont, California.
Tesla shares rose 1.5% in U.S. trading, even as some analysts questioned where the money-losing company will get the capital required to build and staff such a large plant.
‘Cash-flow positive’
Mr. Musk has said Tesla will be cash-flow positive this year. Analysts have predicted it will raise capital to fund a list of new projects, including an electric semi truck, a pick-up truck, a compact SUV and new battery and vehicle production facilities that Mr. Musk has proposed for China and Europe.
“I am sure that Tesla needs fresh money at the latest next year,” said Frank Schwope, an analyst with NORD/LB.
The Shanghai government suggested it could help with some of the capital costs. “The Shanghai municipal government will fully support the construction of the Tesla factory,” its statement said.
