Tesla CEO Elon Musk and Shanghai’s Mayor Ying Yong attend the Tesla Shanghai Gigafactory groundbreaking ceremony in Shanghai, China January 7, 2019.
Aly Song | Reuters
According to fresh estimates by JL Warren Capital, Tesla sales in China should hit around 6,400 vehicles this quarter, with most orders coming in for its most affordable electric vehicle, the Model 3 sedan.
The lowest-priced standard-range version of that car, which sells for 364,000 RMB (around $51,000 today). is a big hit in China already. Orders spiked after Beijing gave Tesla, and dozens of other electric vehicle makers there, a healthy tax break earlier this month. The “purchase tax” exemption lowers the cost of buying a Tesla in China but around 99,000 RMB (about $14,000).
However, Tesla’s Shanghai factory probably won’t be able to make Model 3s in high volumes — meaning 1,000 to 2,000 cars per week — until mid-2020, the investment research firm predicts.
China represents a critical growth market for Tesla, and CEO Elon Musk talked up the company’s plans there on its latest earnings call in January. “We need to bring the Shanghai factory online,” Musk said. “I think that’s the biggest variable for getting to 500,000-plus a year. Our car is just very expensive going into China. We’ve got import duties, we’ve got transport costs, we’ve got higher costs of labor here.”
Musk told investors on that call that Tesla should be able to hit a Model 3 production rate of 1,000 or even 2,000 cars per week in Shanghai by the end of 2019.
After analyzing public records and interviewing with people with firsthand knowledge of Tesla’s “Gigafactory 3,” JL Warren wrote in a note to the firm’s clients:
“Small scale testing is to start in Q4 with meaningful production increases not expected until Q1 and Q2 2020, with the goal of 2,000 units per week in June 2020. Unlike the fully automated process in California, GF3 will be semi-automated, as the local labor cost is still lower than full automation. Due to the nature of semi-automation (including human fatigue, work breaks needed etc) this phase of factory ramp up at the GF3 has a maximum of ~2,000 units per week by mid of 2020, vs. ~5000 units per week in California.”
No cars are expected to come out of Shanghai until November at the earliest, unless they are literally hand-made, and production lines there won’t likely be complete for another two months, the note also said.
Shares of Tesla were down half a point on Wednesday.