Tesla has signed an agreement with the government of Shanghai that details the EV maker’s plans to set up a new production facility in the Chinese city. The company aims to produce as many as 500,000 units of its lineup at what it is calling the Gigafactory 3.
There are no clear details as to when the factory will be operational, but Tesla claims construction of the facility will commence “in the near future”, after the company acquires all the necessary permits. Once construction begins, it will take Tesla close to two years to start assembling tis models on site. From then on, the company expects another three years to take the Gigafactory to full production capacity of 500,000 vehicles per year. Apart from manufacturing, Tesla will also set up research and development as well as sales operations at the site.
“Shanghai will be the location for the first Gigafactory outside the United States,” CEO Elon Musk said in a Shanghai government release provided by Tesla. “It will be a state-of-the-art vehicle factory and a role model for sustainability. We hope it will be completed very soon. We’ve been impressed by the beauty and energy of Shanghai, and we want our factory to add to that.”
The agreement comes after Tesla hiked prices of its products for sale in China by more than 70 percent, a move which looks like a retaliation to China placing harsh tariffs on U.S. manufactured goods including automobiles. The vehicles assembled at the Gigacfactory 3 will be supplied in the Chinese market almost exclusively. Elon Musk aims to open another facility in Europe and eventually have ten to twelve Gigafactories worldwide.
Investors are questioning the move to open one more facility overseas at a time when Tesla is struggling to meet its promised targets through its two domestic Gigafactories, one each in Nevada and California. The company recently reported that it had finally achieved its goal of assembling 5,000 Model 3 units every week by the last seven days of the second quarter. It also clarified that the new facility in Shanghai “will not impact our U.S. manufacturing operations, which continue to grow.”