Tesla Inks Land Deal Advancing Gigafactory in China

(Image: Tesla’s first Gigafactory in Nevada. Credit: Tesla)

Tesla and the Shanghai government signed a deal this week designating a nearly 3 million-square-foot area for the company’s Chinese Gigafactory, Reuters reported. The new facility is expected to double Tesla’s global manufacturing size and help make their electric vehicles affordable in the country.

Once construction starts on the new Gigafactory, Tesla set a two-year timeline for starting to produce electric vehicles at the plant, Greentech Media’s Emma Foehringer reported. Several years after the facility opens, the automaker anticipates producing about half a million vehicles annually.

Gigafactories are named for the unit of measurement representing “billions.” They can produce lithium-ion batteries, electric motors as well as Tesla’s Powerwall and Powerpack energy storage products. Panasonic is Tesla’s partner for two US-based Gigafactories. The first was built in Sparks, Nevada, with $1.3 billion in tax breaks. Its estimated final cost is $5 billion. Sitting about 23 miles east of Reno, the facility entered mass-production mode early last year.

A second Gigafactory located in Buffalo, New York, opened last year to make solar roof tiles for Tesla subsidiary SolarCity. New York State provided a $750 million subsidy package for the plant. However, issues with the tile design and the production process have caused delays, Reuters reported in August.

Elon Musk, who remains Tesla’s CEO but stepped down as chairman for three years following an SEC settlement last month, announced that the next Gigafactory would be in China during a Q1 2018 earnings call and incorporate vehicle production.

Although Tesla didn’t reveal how much the company paid for the 860,000-square-meter (over 2.8 million square feet) plot of land, Reuters journalists Yilei Sun and Adam Jourdan cited the Shanghai Bureau of Planning and Land Resources saying that a sale happened on Wednesday for around $140 million.

With the trade war between the United States and China continuing, Tesla currently has to pay a 40% import tariff for vehicles sold to Chinese customers, GTM’s Merchant points out. Tesla’s vice president of worldwide sales released a statement that securing the gigafactory site in Shanghai represents an important milestone for the company.

“The factory will help tap China’s rapidly growing market for so-called new-energy vehicles (NEVs), a category comprising electric battery cars and plug-in electric hybrid vehicles, even as China’s wider car market cools,” Sun and Jourdan wrote this week.