esla is using its site in Shanghai to supply the European market, pending the construction of a fourth plant in Germany.
Elon Musk continues the expansion of Tesla’s Gigafactory, named after the American brand’s battery production plants. Until now, all the Tesla available on the old continent came from the manufacturer’s American factories. But European customers of Model 3 will now be supplied with models designed in the brand’s third “mega-factory”, located in Shanghai.
This solution will temporarily allow Tesla to supply the European market on a regular basis before construction of the fourth Gigafactory in Grüneheide, southeast of Berlin, Germany, is completed. The latter has fallen behind the development originally planned due, among other things, to the global health crisis and the concern of a local association that the plant’s water consumption was a threat to the environment.
In addition to ensuring European production of the Model 3, the Shanghai Gigafactory also allows the American manufacturer to establish a long-term presence on the Asian continent, China being an indispensable market due to its size. It remains to be seen whether the quality control problems at the end of the production chain, which many owners regularly report on the Internet and social networks, will be alleviated compared to Tesla products produced in the United States.
Singapore, Australia and New Zealand: challenging markets for Tesla
While Singapore, Australia and New Zealand have followed Europe and China in the adoption of electric vehicles, these countries may present a more complex challenge for Tesla and its rivals.
The U.S. automaker may need to make changes to its assembly configuration in Shanghai to target these right-hand-drive regions.
On capacity of the Chinese Giga Factory?
What if this export strategy hides a lower than expected Chinese demand?
Currently, Tesla produces in China about 11,000 cars per month, all of which are sold on the domestic market. By way of comparison, the startup Nio produces an average of about 3,500 units per month.
While financial analysts believe that Tesla’s export plans are positive for the company – especially since Model 3s made in China are cheaper than those produced in the United States – they do wonder. Any willingness to export vehicles produced in China – even though demand for electric vehicles is expected to grow daily – could indicate that Chinese consumers’ enthusiasm for the Model 3 is not what Elon Musk had hoped for … leading to overcapacity at the Giga Factory in Shanghai.
Lower production costs in China
Approximately 80% of the parts Tesla uses in its Chinese plant will come from local suppliers by the end of 2020, Musk said in releasing results last July.
In December 2019, prior to the VID-19 outbreak, Song Gang, the manufacturing manager of the Shanghai plant, said Tesla wants to source 100% locally by the end of the year.
tesla model 3 has reduced its prices in China as part of an initiative to increase sales in the world’s largest market for electric vehicles. Elorn Musk made the case for his strategy at the time, saying that making Tesla cars more affordable was a key objective and that sourcing locally was a way to reduce expenses.