Tesla's China-made cars arrive in Shanghai as firm taps key market

Tesla Inc. delivered its first China-built cars, a milestone for Elon Musk’s company as it accelerates a push in the world’s largest electric-vehicle market.

The company handed over the first 15 Model 3 sedans assembled at Tesla’s new multibillion-dollar Shanghai plant -- its first outside the U.S. -- to company employees at the facility on Monday. More workers will receive vehicles over the next couple of days, and deliveries to customers will start in January, company officials said at the ceremony.

Chief Executive Officer Musk is counting on the China plant to help build on recent momentum for the company in the world’s largest market both for EVs and autos in general. The Model 3 will compete with electric cars from local contenders such as NIO Inc. and Xpeng Motors, as well as global manufacturers including BMW AG and Daimler AG.

While deliveries to customers haven’t started, Monday’s milestone caps several months of wins for Musk. The latest came Friday, when the locally built car was included on a list of vehicles qualifying for an exemption from a 10% purchase tax in China.

The stock has surged since the carmaker reported a surprise profit on Oct. 23, and is now more than double its year low of $178.93 in June. The shares closed little changed at $430.38 on Friday.

Muddy Plot

A crowd of about 200 people, including media and Tesla workers, had gathered inside the plant on Monday and clapped and cheered as Tom Zhu, the company’s China chief, handed over the first cars. One of the employees receiving a car presented it to his girlfriend, along with flowers, and proposed to her. She accepted by nodding, and they kissed.

The Shanghai Gigafactory broke ground at the start of this year. Originally just a muddy plot about a 90-minute drive away from Shanghai’s city center, it is now a crucial test of Musk’s bid to keep his carmaker profitable as he bets big on Chinese appetite for electric cars.

With Tesla’s volatile stock price and strained finances, investors will be watching closely how the ramp-up unfolds. The multibillion-dollar investment will be a deciding factor to determine whether Tesla will be able to take on local competitors and fend off challenges by the likes of Mercedes-Benz, BMW and Audi.

As part of its China expansion, Tesla plans to add dozens of locations in the country over the next year for showcasing its vehicles and providing charging and other services, said Xue Juncheng, director of China after-sales, at the ceremony.

Volume Goal

Although Musk has said he’s never seen a factory built so quickly, the first delivery came only a day before the end of 2019. Back in April, the CEO predicted Tesla would make at least 1,000 cars a week in Shanghai by the end of the year — a volume the company’s original factory in California spent months trying to hit. He’s also said a weekly rate of 3,000 is a target at some point.

Tesla said in October the locally built Model 3 will be priced from about $50,000. On top of the tax exemption announced Friday, the China-built model this month qualified for a government subsidy of as much as about 25,000 yuan ($3,600) per vehicle.

The company may lower the price of the locally assembled sedans by 20% or more next year as it starts using more local components and reduces costs, people familiar with the matter have said.

The launch will also provide clues about Tesla’s ability to truly go global. The company is planning to follow up with a production facility in Germany to tap rising electric-car demand in Europe.