Tesla Set to Build Shanghai Factory

Electric automobile technology giant Tesla doesn’t seem to be resting on its oars in achieving even more, as regards innovative automobile manufacture and distribution. The company’s recent move on establishing a complete manufacturing site on Chinese soil may have left some questions on the table.

Tesla’s proposed factory to be built in Shanghai would be its very first factory to be built outside the USA, and also the first automobile company in the whole of China, whose ownership is entirely foreign. This investment intention which has already been signed and authorized by the Shanghai government is expected to see the Tesla company increase its automobile manufacture by up-to a hundred percent, as deduced from company projections.

Although the Chinese government has given their support so far, there is, in fact, some round of speculations claiming that the permissions were granted based on the many advantages the deal would bring for China; especially regarding its objective to continually top the electric automobile sector.

All these comes amidst deepening trade war between the USA and the communist lead nation, where tariff rates on import goods exchange between the two nations, are now on a high side.

Tesla Company’s Estimates and Projections

According to Tesla CEO Elon Musk, the company would begin construction of the East Asia factory once all the formalities have been made, with the Chinese authorities. The construction is expected to commence at an undisclosed time, but the company says automobile production would commence after two to three years after the factory construction is completed. If everything goes according to plan, Tesla management has estimated a whopping 500,000 cars to be produced for each year- from the Shanghai factory alone, after the first two years of production. This gives an insight as to how large the project would be, as well as the financial implications in the offing.

Possible Reasons for the Shanghai Move

The reasons for the intended Tesla company’s manufacturing operations in China have not been clearly stated, but there are indications that the decision could have come from a perceived prospect in the Chinese markets. This is, even so, because China has the highest electric car adoption, while the Chinese government may even still, be making heightened plans to implement an entire electric automobile use for the country in the near future.

Financial Concerns for Ambitious Tesla

As much as the expansion motive of the Tesla company seems to be a step in the right direction, there are also concerns for the company’s chances of successfully pulling through with its Shanghai factory roadmap. These concerns arise due to the company’s antecedent loss in recent times, as well as its pilling up debts that have continued to increase by billions of dollars.

Analysts who talked about the project, have continued to fear the looming financial crisis that could ultimately set in for the Tesla company, if their seeming over ambitiousness- which is considered quite inappropriate for the present time, is not substantially laid to rest.

Meanwhile, in a bid to ameliorate capital requirements, the Shanghai authorities have mentioned the possibility of rendering some assistance for the factory construction. But even still, there isn’t yet a clear statement of commitment to this effect, and the extent of assistance that could be rendered is in fact unclear.

If a good percentage of the Tesla company plans are sufficiently implemented, then the management would be proud that the project was initiated. But then, there are a number of factors to consider, and these are the determinants in all essence.