Tesla to break ground on Shanghai plant as trade war lingers

The 2020 Kia Soul EV which is expected to be an affordable electric car

2020 Kia Soul EV

Tesla boss Elon Musk said the electric car-maker would break ground Monday on a Shanghai factory that will allow it to sell direct to Chinese consumers and avoid tariffs from the China-US trade war. The challenging environment also includes competition from several start-ups that all want to be like Tesla.

The Securities and Exchange Commission, which ended up fining Musk and Tesla $20 million each over the August 7 tweet, as well as removing Musk as chairman and forcing the addition of two independent directors to the board, found in a probe that Musk's relationship with Grimes played a role in setting the price he said he would ask for Tesla.

A local plant will help Tesla lower prices in the market to compete with a new generation of local rivals including Nio, Byton and XPeng Motors. The company cut the price of all its models by US$2,000 to partially offset the loss of the subsidy.

China typically requires foreign automakers to set up joint ventures with domestic firms when establishing manufacturing plants, which entails the sharing of profits and technology with local partners. But despite what one might read in Elon Musk's Twitter feed, it's not yet the top dog. The two sides have called a truce in their trade fight and are engaged in talks to cool tensions, with China temporarily scrapping a retaliatory 25 percent tariff on US -made cars starting January 1. "All Model S/X & higher cost versions of Model 3/Y will still be built in United States for WW market, incl China", he later added, referring to the worldwide market including China. In November, it clocked 393.

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Equity losses in China previous year wiped out more than $2 trillion of wealth, denting consumer appetite for luxury goods. A key China PMI index fell below 50 in December to its lowest reading since May 2017, signaling weakening demand in the $12.2 trillion economy.

A Chinese flag is seen on the land secured by Tesla for its Gigafactory in Shanghai.

"Aiming to finish initial construction this summer, start Model 3 production end of year & reach high volume production next year", he said, adding that "Shanghai Giga production of Model 3/Y will serve greater China region".

The Shanghai government said in a statement its mayor Ying Yong urged the firm to "accelerate" work on the factory and said production would start to some degree in the second half of 2019 during a land visit in December a year ago.

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