Pre-orders for Tesla’s China-manufactured model attracted huge traffic to its website when it launched recently. The company is projected to start deliveries to customers in China from its domestic plant within the next 6-10 months.
Tesla in China
At present, all cars sold by Tesla in China are imported from the U.S. This adds several additional costs to the vehicles, like import tariffs, logistics costs, and so on. As a result, prices of Tesla cars in China are often higher than in the U.S. With a local manufacturing plant, this price difference is eliminated. Tesla has revealed the price of the Model 3 Standard Range Plus to be US$45,510.
This is almost 13 percent lower than the U.S. imported basic Model 3 version, which is one reason why pre-orders saw huge demand from the public. In fact, the first pre-order was placed within three minutes of the registration launch. Tesla’s Chinese website crashed due to high traffic. The cars will be manufactured in the Gigafactory the company is building in Shanghai. Construction began in January this year and it is expected to be operational by September. A recent drone flyover video shows construction work moving ahead according to schedule.
“Operation platforms are now present on the site, suggesting that the construction of the facility’s interior, as well as the preparations for the buildout of the factory’s assembly lines, is entering its initial phases… Other signs of the work being done in the interior of Gigafactory 3 include the fewer number of cranes on the area. Updated images of the facility’s interior are yet to emerge, though it is not too farfetched to speculate that Tesla’s construction partner is now getting sections of Gigafactory 3’s interior ready for the setup of the Model 3’s production equipment,” according to Teslarati.
Tesla’s local offering is expected to put up a strong fight against fossil-fuel cars like the Mercedes C-Class and BMW 3 Series. In fact, the Tesla Model 3 seems to be not only cheaper than its competitors, but also to offer better performance and technology. Since the car runs on electricity, owners of the Model 3 are estimated to save more than 80 percent in fuel costs. For instance, a 9,000 mile per year run on the Mercedes C300L sport or BMW 330i xDrive M will cost around US$1,400 annually in fuel costs. In contrast, Tesla Model 3 owners would only have to shell out US$175 per year for electricity, thus saving nearly US$1,150.
There is a possibility that Tesla’s electric cars might become eligible for government subsidies. This will enable the company to push down prices of its cars even lower, giving it a clear advantage over fossil fuel alternatives. Tesla’s Gigafactory is projected to hit full production volume by 2020.
China is home to about 486 electric vehicle manufacturing companies. Many of them have rushed into the industry in the past decade with little experience. As a result, electric cars manufactured in China have suffered from severe quality issues. Some electric vehicles even caught fire spontaneously. To control the quality of electric vehicles, the Chinese government is considering raising entry barriers into the market.
Some of the top electric car manufacturers in China include Byton, BAIC, BYD, and NIO. Tesla will have to fight with these domestic manufacturers to establish dominance in the market. But even if Tesla does not become the number one electric car company in China, it still stands to benefit immensely due to the huge market size of the country.
The only risk the company faces is the U.S.-China trade war. Though the Chinese government is not likely to act against Tesla’s domestic manufacturing unit in case the trade conflict gets ugly, hyper-nationalistic propaganda could position the company as an “enemy,” thus turning public opinion against it.