Tesla reportedly plans to start production in China this month

New factory to begin during ongoing US-China trade war and slowdown in Chinese car sales.

    Tesla's $2bn factory in Shanghai - its first car manufacturing site overseas - received key Chinese government approvals last month and is on schedule to start production in October, sources say [File: Amanda Voisard/Reuters]
    Tesla's $2bn factory in Shanghai - its first car manufacturing site overseas - received key Chinese government approvals last month and is on schedule to start production in October, sources say [File: Amanda Voisard/Reuters]

    Tesla Inc's factory in China aims to start production this month but it is unclear when it will meet year-end production targets due to uncertainties around orders, labour and suppliers, sources with knowledge of the matter have told the Reuters news agency.

    The United States-based electric vehicle maker aims to produce at least 1,000 of its entry-level Model 3s a week from the new factory by the end of this year, the centrepiece of its ambitions to boost sales in the world's biggest car market and avoid higher import tariffs imposed on US cars.

    The plant's mass production schedule is crucial for Tesla's hopes of reaching its total production rate at an annualised 500,000 vehicles by the end of this year.

    The $2bn factory - Tesla's first car-manufacturing site overseas - gained key government approvals last month and is on schedule to start production in October, the sources said.

    "We aim to start some production in October, but the actual production volume depends on many factors including car orders we received, performance of newly hired workers, supply chain and so on," a Tesla source told Reuters.

    "It's unclear when we can reach the 1,000-2,000 units per week target," the person said, declining to be named as he was not allowed to speak to media.

    Tesla did not respond to requests for comment.

    The factory is kicking into gear during the US-China trade war and weakness in China's auto market. Sales of new energy vehicles contracted for a second month in a row in August, and are likely to grow at a slower pace this year to 1.5 million vehicles, down from a previous forecast of 1.6 million, according to an industry association.

    Tesla has fared better, with China sales rising 98 percent in the first seven months of this year thanks to strong demand for the Model 3, according to research firm LMC Automotive.

    New phase

    Tesla has embarked on a new phase of construction work at the factory in a sign of confidence in its China strategy. The new facilities will include battery pack production units, according to a company source and documents.

    The so-called 1.5-phase works, which have not previously been reported, include a production workshop and an energy centre, construction documents showed. Construction is scheduled for completion by around the end of this year.

    Tesla also is looking to hire battery-related production engineers in Shanghai, according to its job advertisements.

    The plant, which Tesla says will be simplified and more cost-effective than its existing Model 3 line, will have 500,000 units of annual capacity when the second phase is completed, doubling from initial phase capacity of 250,000 vehicles.

    The factory, China's first fully foreign-owned car plant, is a reflection of Beijing's broader shift to open up its car market.

    Shanghai authorities have offered assistance to speed up construction, and China excluded Tesla models from a 10 percent car purchase tax on August 30.

    State partners of the Tesla project include Shanghai Construction Group, China Construction Industrial & Energy Engineering Group, State Grid, Power Construction Corporation of China, and MinMetals' Shanghai unit Baoye, according to multiple sources involved in the construction project.

    SOURCE: Reuters news agency