Tesla, China, Both to Benefit From ‘Gigafactory’ Deal

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Giant carmaker Tesla has announced that they are building a “Gigafactory 3” in China, a “bold” move that will allow them to produce some 500,000 vehicles per year for Chinese customers.

“Today, we have signed a Cooperative Agreement for Tesla to start building Gigafactory 3, a new electric vehicle manufacturing facility in Shanghai,” a Tesla statement sent to the media read, adding that they are expecting construction to begin as soon as they secure all the necessary documents and permits.

Tesla said that from there, “it will take roughly two years until we start producing vehicles and then another two to three years before the factory is fully ramped up.”

In 2017, at least 15 percent of the total 103,000 Tesla cars produced have gone to China.

Bloomberg described Tesla’s decision as a “bold move,” since the car company has been “burning through billions of dollars as it’s struggled to ramp up manufacturing of the Model 3 sedan.”

“The biggest question right now for investors — bulls and bears alike — is how are they going to pay for it. They will have to get capital,” said an analyst in a Bloomberg Television interview.

Still, CNBC said Tesla’s shares rose to 1.2 percent shortly after their announcement.

However, analysts are saying that it is not only Tesla who stands to benefit from the construction of the gigafactory and the eventual building of cars there. Reports said Tesla’s plan will bring China’s “ambition to grow from the world’s largest auto market into a true automotive heavyweight, bringing key technologies and opportunities for local parts makers.”

“If foreign automakers develop and build electric vehicles in the country, its domestic industry has the chance to absorb new, advanced technologies, helping China transform from a mere market into an automaking heavyweight,” a report added.

Tesla said they are looking forward to working and building more cars for their Chinese customers.