Buying Land for a Factory

Securing this site in Shanghai, Tesla’s first Gigafactory outside of the United States, is an important milestone for what will be our next advanced, sustainably developed manufacturing site,” said Robin Ren, Tesla’s vice president of world-wide sales, in a statement issued following a signing ceremony in Shanghai on Wednesday.

The 210-acre site in Shanghai’s eastern Lingang district cost $140 million, according to a Shanghai government website tracking major land purchases in the city. Though it didn’t mention Tesla by name, its description of a large land sale concluded on Wednesday in Lingang almost certainly refers to the Tesla deal.

Tesla Chief Executive Elon Musk signed an agreement in July with the local government to build a factory in Shanghai. Telsa will wholly own the facility, which is intended to produce up to 500,000 cars a year by the end of the plant’s first decade.

In a third-quarter production update this month, Tesla said it was “accelerating construction of our Shanghai factory” in response to the U.S.-China trade dispute. U.S.-built vehicles face a 25% tariff introduced by China in July in retaliation for new U.S. auto tariffs. The 25% is on top of the 15% tariff China levies on all imported vehicles.

Separately, Tesla said Mr. Musk plans to buy $20 million worth of stock in the electric-car maker during the next open trading window. Mr. Musk will buy the stock at the then-current market price.

The company announced the planned stock purchase in a filing with the U.S. Securities and Exchange Commission, in which Tesla also discussed court approval for the settlementsbetween Mr. Musk, Tesla and securities regulators over the chief executive’s August tweet saying he had secured funding to take the auto maker private.

The settlements require Tesla and Mr. Musk to pay $20 million each in fines over statements that regulators said were misleading.

China is Tesla’s No. 2 market after the U.S.; it sold about 17,000 cars there last year, compared with roughly 50,000 in the U.S. and 103,000 globally.

But the U.S.-China trade confrontation has driven up the cost of Tesla’s imported vehicles in China. Tesla’s cars cost 55-60% more in China than comparable EVs built locally, according to the company.

Having secured the land, Tesla is targeting “a capital efficient and rapid buildout, using many lessons learned from the Model 3 ramp in North America,” the company said. Auto analysts say it will take two or three years for Tesla to begin Chinese production.


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