Tesla approved to begin operations in its China Gigafactory

Source: Elon Musk | Twitter

China’s Ministry of Industry and Information Technology has given Tesla the approval to start operations in its Gigafactory in Beijing. The news clears a major hurdle in expanding its electric vehicle business in the region.

“The green light is fully given to Tesla for production in China,” said Yale Zhang, head of the Shanghai-based consultancy Automotive Foresight. “Tesla can start production any time,” he added.

Reportedly, Tesla’s $2 billion Gigafactory 3 will start production of about 1,000 Model 3’s per week starting next week, and will continue to ramp up its production towards the end of the year to meet annual goals.

Notably, Tesla has suffered delays in its production and delivery at the beginning of 2019 due to inadequate fulfillment of demand. Initially, Elon Musk tweeted in February claiming that Tesla will make around 500,000 cars by 2019. Tesla’s initial forecast indicated only a maximum of 400,000 this year — to which the Securities and Exchange Commission filed Musk for contempt.

By the second quarter, Tesla released its second-quarter report saying that it had 87,048 electric cars produced and 95,200 delivered. This is Tesla’s impressive and record-breaking number to date; however, remained short to reach its goal of 400,000 units.

With Tesla’s added production from its Beijing Gigafactory 3, it merits the access to the world’s biggest car market. Hence, doubling (or tripling) Tesla’s production numbers and establish a significant presence in the region that could potentially extend to other neighboring countries.

Tesla’s operation in China is the first electric vehicle factory wholly-owned by a foreign automaker in the country, and the company’s second full-scale electric vehicle production factory outside its Fremont, California operation. Its factory in Tilburg, Netherlands performs the final assembly of modules.

China approving Tesla for sole ownership of its Gigafactory comes after the country’s decision to phase out limits on foreign ownership of auto companies by 2022.

In previous years, western automakers — looking to operate in China — needed a joint venture partnership to start operations. The non-Chinese companies are entitled to only 50% (or less) of the joint venture. Tesla will be the first completely foreign-owned manufacturing facility in the world’s largest auto market.

Tesla’s move is also seen as a way for the company to avoid higher import tariffs that are imposed on cars made in the U.S. Officials from the Shanghai government have exempted Tesla cars assembled in China from the 10% sales tax.

As Musk said in July, “orders generated during the quarter exceeded our deliveries, thus we are entering Q3 with an increase in our order backlog. We believe we are well-positioned to continue growing total production and deliveries in Q3.”

The company is “well-positioned to continue growing total production and deliveries” in the coming quarter, the electric car company founder said at the time.

The last hurdle that Tesla needs to overcome to start its operation in China is to fulfill the staff and technical requirements.

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