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Tesla’s Gigafactory 3 in Shanghai to start production in two years

The deal with China may double the size of the electric automaker's global manufacturing
Tesla’s Gigafactory 3 in Shanghai to start production in two years
It will be an estimated two years until the factory begins producing vehicles

Tesla Inc (NASDAQ:TSLA) is heading overseas after signing an agreement with Chinese authorities.

The electric-vehicle manufacturer will build a new auto plant in Shanghai, its first international factory, as per a Reuters report.

The deal is expected to double the size of Tesla’s global manufacturing.

“Tesla is deeply committed to the Chinese market, and we look forward to building even more cars for our customers here,” said CEO Elon Musk in a statement to Electrek.

READ: Tesla ups prices of Model S and X in China in response to tariffs

The automaker said that the building of Gigafactory 3 will begin “in the near future” once it receives all the necessary permits.

It will take an estimated two years until the factory begins producing vehicles. Within two to three years after that, the factory is expected to produce around 500,000 vehicles per year.

“Today’s announcement will not impact our US manufacturing operations, which continue to grow,” Musk added.

Tesla recently announced that it would raise the price of US-made vehicles in China due to the retaliatory tariffs imposed by China’s government.

An analyst weighs in

Bank of America/Merrill analyst John Murphy sees the Shanghai factory as an opportunity to expand production capacity, according to a note shared by TheFly.com.

As per a presentation at an investor meeting, Murphy said the company may produce more than 6,000 vehicles by the end of the third quarter. By the middle of 2019, Tesla could be producing more than 10,000 vehicles per week.

READ: Tesla meets its Model 3 production goal, sets higher goal for next month

However, the analyst did note the risk of funding with operating cash flows and higher prices due to trade tensions between the US and China.

Shares of the California-based company were down about 2% to US$316.31 in Wednesday pre-market trading.

 

Contact Lenore Fedow at [email protected]

Follow her on Twitter@LenoreMariee

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