This is going ahead despite of all the problems Elon Musk has been experiencing, but he has had some great successes, for example with Space X. Will this be another success?
He’s coming along a bit to the Tesla side, the big question here is; are we talking in Musk’s time whether this factor will be able to sort of deliver for him in the time-frame that they are talking because they are being really agressive.
They are trying to start initial production of the Model 3 by the end of this year. At this groundbreaking event overnight in Shanghai, we are looking at big money field. They have got a long way to get this factory built.
Getting Model 3 assembled in China to avoid import tariff regardless of whether they are coming down a little bit, it still is going to be expensive for them to be trying to sell that car at the price point that they are at right now.
There is some skepticism that they will be able to produce by the end of 2019 because its really short time for auto assembly plant. Of course this is a company that built a tent outside its factory in California that led to some surprising results to the company, or at least contributed to that last year. But certainly when you talk about the market potential, it can be rewarding if they are able to start production locally and bring the price down for the model 3. This is a market in which last year over one million electric vehicles were sold for the first time and the government is aiming for 2 million by 2020. So, certainly there is a lot of support, a lot of state support for EVs with the consumer demand. But also to question about just to what extent the economic slowdown in China will have an impact on demand for auto sales going forward.
There is a bit a lag in fully battery powered electrified vehicles that established automakers are bringing to market. A fair amount of China specific models that the companies are making with their joint venture partners in China, but there aren’t any Chevrolet Bolt or the Nissan Leaf in that market at this point. Perhaps to some extent a concern of intellectual property protection. So a lot of the competition actually in the electric vehicles space in China is the really low end price point where you are seeing people buying shorter range electric vehicles and not very Tesla like cars, so maybe there are some openings here for Tesla to compete.
Its going to be really interesting to see them just getting started with local production there. This is a very unique situation where they don’t have a joint venture partner, this is an exception that the government made for Tesla. This plant is going to be built in free-trade zone, so this is a big part of the government in China, sort of putting their money where their mouth is in terms of opening up as its a requirement. U.S and German companies have been very critical of China’s policy of mandatory local partner in order to produce in the country. From this development the government have given a signal that they are going to loosen up a bit but haven’t actually followed through.