Tesla China plant expansion in doubt

The expansion of Tesla’s Shanghai factory has been postponed, according to people familiar with the matter. Data concerns hamper U.S. electric-car makers’ ambitions to sustain growth in China.

The so-called Phase 3 expansion, originally scheduled to begin in the middle of the year, will double the factory’s capacity, said the people, who asked not to be identified because they weren’t authorized to speak publicly. It was expected to sell about 2 million units a year.

Some central government officials are concerned that a U.S. company linked to Elon Musk’s Internet from Space initiative, Starlink, has such a large presence in Asia’s largest economy. said one of the people involved.

Tesla’s cars aren’t equipped with Starlink equipment that allows users to bypass China’s Great Firewall, but Beijing has become increasingly concerned about data security and social stability. increase.

Musk is the CEO of both Tesla and Space Exploration Technologies, which began launching Starlink satellites in 2019. Tesla’s stock was down as much as 2%, wiping out previous gains as of 5:13 a.m. New York time before normal trading began. .

The delay coincides with growing public antipathy to Tesla amid rising tensions between Washington and Beijing. Angry Tesla owners flocked to Chinese showrooms over the weekend, complaining that they had missed the next round of price cuts. Concerns have resulted in a ban on entry to Chinese military and residential installations in early 2021.

A Tesla representative in China did not immediately respond to a request for comment. A representative of China’s National Development and Reform Commission did not respond to a faxed request for comment.

Phases 1 and 2 of Tesla’s Shanghai factory construction and expansion have already been completed. The factory, which broke ground in 2019, is now capable of producing 1 million Model 3 and Model Y per year after an upgrade in 2022.

The future of Phase 3 could still change pending further guidance from senior central government officials, one of the people said. Tesla has the backing of local Shanghai officials, the people said.

China has become a key manufacturing center for Tesla, which is based in Austin, Texas, with its Shanghai factory producing more than 710,000 vehicles in 2022, or about 52% of the company’s global output. But consumer demand in China, the world’s largest car and EV market, has been hit by slowing economic growth and until recently he was Covid Zero compliant, resulting in months of lockdown. Downs and supply chain disruptions occurred.

To combat this, Tesla is cutting prices and maintaining incentives. Still, December shipments dipped to around 56,000 units as production was temporarily halted due to equipment upgrades and weak consumer demand. Meanwhile, local rival BYD shipped 111,939 battery electric vehicles last month.

As its business in China stalls, Tesla is expanding in other parts of Asia, including opening a showroom in Thailand. Bloomberg reported Wednesday that the automakers are nearing a preliminary agreement to set up a factory in Indonesia that will produce one million cars a year.

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