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Tesla To Build $5 Billion Plant In China

Shanghai

Tesla plans to build a US$5-billion car-manufacturing plant near Shanghai in China, and is weighing possibly raising part of the funds for the factory from local partners, Bloomberg reported on Wednesday, citing a person familiar with the plans.

Tesla expects to begin production of its Model 3 in the new Chinese plant by 2020, Bloomberg’s source said.

Last month, reports had it that Tesla plans to build a manufacturing plant in China with a capacity to produce 500,000 vehicles annually, and was expected to sign a preliminary deal on the matter with local entities in Shanghai.

Elon Musk visited China in July, and said that he had excellent meetings with senior leaders in the country. Musk said on Twitter on July 12 that he was “impressed” with the Tesla China team and the potential for the future.

According to Bloomberg, Musk struck a preliminary agreement to begin construction for the 500,000-car-a-year plant in China, with first cars expected to roll out of the assembly lines in about two years. Neither Tesla nor the Shanghai officials have revealed any estimates about how much the factory would cost and how it would be paid for.

Now Bloomberg’s source says that Tesla might be looking to raise part of the funds from Chinese partners. Related: T-Mobile, Nokia Up Ante for 5G In $3.5B Deal

The U.S. electric vehicle maker continues to insist that it doesn’t need to raise money via new bond or equity issues, despite analyst estimates that it would need to tap markets again as it is burning through a lot of cash.  

Musk’s visit to China and a potential deal on a Chinese factory for Tesla is coming at a crucial moment for the U.S. EV maker, which has reportedly had to significantly raise the retail prices of the vehicles it sells in China, due to the latest tit-for-tat trade tariff spat between the United States and China.  

By Tsvetana Paraskova for Safehaven.com

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