SHANGHAI, CHINA – APRIL 08: An aerial view of the construction site of Tesla’s manufacturing … [+]
Tesla cleared a major hurdle Thursday in its quest to grow in China when the government certified the electric automaker to begin production there.
Reuters first reported the approval by China’s Ministry of Industry and Information Technology, but Tesla did not immediately respond to questions, including when production in China would begin. The plant, which is already under construction, is near Shanghai.
China is important to Tesla’s global strategy because the government has set ambitious targets for electric vehicle sales, in contrast to the U.S. where the U.S. Environmental Protection Agency is fighting California and other states in order to block emission and fuel economy standards that encourage EV sales.
BloombergNEF estimates that there may be as many as 162 million vehicles on China’s roads by 2040.
China is building about 20 “EV towns” for automakers and other industries, part of a $30 billion government subsidy to stimulate electric vehicle sales.
This will be Tesla’s first full-scale production plant outside its Fremont, Calif., operation, although it has a factory in Tilburg, Netherlands that performs final assembly of modules.
The decision is also important because China announced in 2018 that it will phase out limits on foreign ownership of auto companies by 2022. Before 2018 western automakers needed a China-based joint venture partner t manufacture in the country. The non-Chinese company could not hold more than 50% of the joint venture. Tesla will be the first completely foreign-owned manufacturing facility in the world’s largest auto market.
That change is aimed at attracting producers of what China officials call “new energy vehicles. In fact, the limits on foreign ownership of hybrid and all-electric cars ended last year. The limit will be lifted for commercial vehicle production in 2020, then for all non-domestic manufacturers in 2022.
Reuters reported earlier this month that Tesla planned to start production at the new Chinese plant this month, but there is uncertainty about the readiness of workers and suppliers.
The Palo Alto, Calif.-based company plans to made at least 1,000 Model 3’s per week at full production. Officials from the Shanghai government have exempted Tesla models assembled there from a 10% sales tax.
Tesla intends to produce at least 1,000 Model 3s a week from the Shanghai factory as it tries to boost sales in the world’s biggest auto market and avoid higher import tariffs imposed on U.S. cars.
Shanghai authorities have offered Tesla assistance to speed up construction, and China excluded Tesla models from a 10% car purchase tax on Aug. 30.
