Breaking: Tesla signs Gigafactory deal in Shanghai

Elon Musk has been busy in Shanghai as he inked the deal with the city for a new production facility. The construction of Gigafactory 3 is to “begin in the near future,” says Tesla so that they may start making both electric cars and batteries there in two years from now.

Tesla’s China headquarters will be located in Lingang New City, near Shanghai’s free-trade zone and in Pudong district. It is to have an annual capacity to produce 500,000 electric vehicles for the local market.

The Gigafactory 3 construction is to begin in the near future once all approvals and permits are in. Tesla reckons it will then take about two years until producing vehicles and then another two to three years before the factory is fully ramped up.

For Tesla, this is a first. Says Elon Muks: “Shanghai will be the location for the first Gigafactory outside the United States. 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.”

In fact the Gigafactory 3 is also the first of its kind in China as no other foreign carmaker wholly owns their production in the country. Tesla had waited for the law that required foreign carmakers to form a joint venture with a local partner to change. They then set up Tesla (Shanghai) Co Ltd, with a focus on electric cars, components and batteries reportedly. This means they will make everything locally, from assembling the electric cars over components to batteries.

Moreover, Shanghai also expects R&D activity from the facility. Reads the press release: “It is expected that Tesla Shanghai will achieve an optimized R&D, manufacturing, and sales operations that will contribute to its global business. This win-win cooperation further enhances Shanghai’s position as a world class automobile manufacturing center.”

Meanwhile Tesla is trying to accelerate sales in its home market as they open the Model 3 configurator for all after first enabling existing reservation holders to confirm their order last week. Our earlier report suggested this to be a tactic to not only sell more electric cars but also a way for Tesla to get more cash flowing.

Update: Neither the city of Shanghai nor Tesla had disclosed the sum of the investment at first but estimates suggested it could possibly surpass Disney’s US$5.5 billion investment in their Shanghai resort. The latest information given by Elon Musk on his Q2 earnings call in late August were that Tesla will be investing around 2 billion dollars in the facility.

scmp.com (Shanghai), electrek.co (North America), bloomberg.com (Update)