Tesla is planning to export its Made-in-China electric cars to Asia-Pacific markets, a move seen as a pushback to President Donald Trump’s efforts to bring back manufacturing jobs to America, analysts said.
The carmaker will ship Model 3s produced at its US$2 billion Gigafactory outside Shanghai to reduce costs and shorten the delivery time to its customers in Singapore, Australia, New Zealand and Europe, Bloomberg reported earlier on Friday, citing people familiar with the decision.
The move suggests Elon Musk will need to ramp up Tesla’s production capacity to meet demand around the region, and stay ahead of a slew of domestic electric-vehicle producers like Nio and Xpeng. These export markets are currently supplied by Tesla’s main factory in Fremont, California.
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“With the export plan, Tesla has to scale up their investment in China, including hiring more people to increase the production,” said Tommy Wu, a senior economist at Oxford Economics. “To an EV company, increasing production in China makes sense as it now is the major hub of core components, including batteries.”
The move appears to go against President Donald Trump’s efforts to bring more manufacturing jobs back to America, and sell its goods around the world, Wu added. Trump’s complaint on the loss of jobs to factories in China is one of the reasons behind the escalation in US-China trade tensions over the past two years.
Tesla currently assembles Model S, Model X, Model Y and Model 3 in Fremont, California. It is also building a factory in Berlin, its first in Europe, which is expected to start production in mid-2021.
The decision to turn Shanghai into a springboard for exports makes sense because of the supply-chain advantage, to Liang Hui, who is the founder and chief executive officer of U Capital.
“It is a bit surprising, but reasonable,” he said. “Currently, the majority of the EV supply chains and components are based in China. They are the most cost-effective and mature ones.”
Despite Tesla’s super stock performance, its business in Europe has not been much to shout about.
It recorded only 1,050 new registrations in July, a 76 per cent drop due to a two-month halt in production at the Fremont factory due to the Covid-19 pandemic, according to an August 31 report published by JATO Dynamics. In comparison, Tesla delivered some 11,000 cars in Shanghai that month.
Tesla’s Model 3, which began rolling out to the domestic market in January, currently outsells its next biggest local rival by three to one, according to industry statistics. The carmaker will start mass output in Shanghai in the coming quarter. Overseas shipments could start as soon as the end of this year, or early 2021, according to the Bloomberg report.
The US car maker has also started making Model Y test vehicles in Shanghai. Photos of a test car being transported on a highway in Yancheng, Jiangsu province, went viral on Chinese social media last week.
Tesla’s made-in-China Model Y launch imminent after resounding success of Model 3 among mainland buyers
Tesla’s early success in China has fueled a 429 per cent rally in its stock this year, and along the way expanded its market value above the worth of traditional carmakers Toyota, Volkswagen, General Motors, Ford and Fiat Chrysler combined.
Tesla’s market cap as of August 28, the last day before the company enacted a 5-for-1 stock split, reached US$412.49 billion, according to S&P Global Market Intelligence.
Toyota’s market cap sat at US$187.40 billion on Aug. 28, followed by Volkswagen, Audi and Daimler. The most valuable US carmaker after Tesla is General Motors at $42.96 billion, according to S&P’s data.
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This article originally appeared on the South China Morning Post (www.scmp.com), the leading news media reporting on China and Asia.
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