Tesla's thrid so-called Gigafactory will not be established in the US.
Tesla has confirmed that the Chinese city of Shanghai would become the first location outside the US where its manufacturing facility would be established.
The new plant is expected to be operational within the next two years. The plant is said to be able to produce 500,000 cars per year. However, the company, at the same time, has also confirmed that this new Chinese plant won't affect its American expansion plans, where it plans to establish a third plant to produce the upcoming Model Y.
The Chinese facility would greatly benefit Tesla, as it is expected to be constructed in a special free-trade zone. Presently, all foreign carmakers looking to manufacture in China need to form a 50:50 joint venture (JV) with a local automaker in order to avoid the 25 per cent tariff imposed on imported cars. The aforementioned free-trade zone will allow Tesla to bypass a local JV without being taxed exorbitantly.
Tesla has been hit hard in China by the recent increase in taxes on US built cars, which has been done as a part of the country’s retaliation towards increased tariffs in the US on many Chinese goods. Consequently, Tesla cars have witnessed a steep price hike in China. A local manufacturing facility should help Tesla stay competitive in the market.