Tesla kicked off production in China, marking a major step in Chief Executive Officer Elon Musk’s global push for electric-vehicle domination and heralding what could be the dawn of real competition in the world’s largest EV market.
Tesla announced plans to construct its Shanghai Gigafactory in July 2018, & only took 6 months til the construction started. In less than a yr from the groundbreaking, the 1st China-Made Model 3 came of the production line in Dec 30th 2019. Model Y project also started.@elonmusk pic.twitter.com/2u11lMxqgU— Vincent (@vincent13031925) January 13, 2020
On January 3, Tesla China announced a reduction in prices for the base version of Model 3. The MIC Model 3 now starts at RMB 299,050 ($42,920), according to the company’s website. As expected, such a decrease in prices entailed an influx of orders.
Seven Tesla showrooms in Beijing recently sold 1,040 Made-in-China Model 3s in just one day. According to a local China news source, the domestically-produced Model 3 has become popular with Chinese consumers since Tesla reduced its price to RMB 299,050. On top of the price decrease, the MIC Model 3 also received government incentives and was approved for purchase tax exemption, making it even more attractive to mainstream Chinese buyers.
This is a Tesla store after price drop in Changsha, a tier2 city in south of China pic.twitter.com/A3FKTtxoXL— Dennis Chang (@infoxer) January 12, 2020
According to Weiot, a total of 1,040 units of Tesla’s locally-produced sedan was sold in seven different stores in Beijing on Friday, January 3, and more vehicles were reportedly sold over the following weekend. An employee working in one of Tesla’s stores in Beijing said that each salesperson in the store sold at least or close to a dozen MIC Model 3s on Saturday, January 4.
On January 4, the first morning after the price cuts, about a 100 customers made online reservations at the Tesla Shanghai Jinqiao Experience store. And this is only in the morning and only the one day. The line of people who wanted to test drive a car was much larger than usual.
According to the salesperson who talked with Weiot in Beijing, most customers visiting the stores came to look at the China-made Model 3. Most—if not all—the customers who visited the store because of the MIC Model 3 also ordered one before they leave.
According to one of Tesla's enthusiasts Ray/Twitter, the MIC Model 3 is of such great interest that buyers stand in line on the street before they can enter the store to survey the car.
Orders placed in the first days of January are expected to be delivered no earlier than early March. At the same time, according to Ray, orders placed a little later, only a few days, will only be delivered at the end of March.
A few days ago, orders placed then were expected to be delivered in early early March. Orders placed now are expected to be delivered in late March.— Ray4️⃣Tesla⚡️🚘☀️🔋 (@ray4tesla) January 12, 2020
According to the latest data, in July this year, China will not reduce NEV subsidies, confirmed Minister of Industry and Information Technology Miao Wei. This is likely to continue to increase demand for the MIC Model 3 in the country.
China's manufacturing strength, low labor and manufacturing costs are all important support for Tesla's domestic delivery capabilities.
Based on the assumption that direct costs of raw materials are expected to decrease by 10-20% after for production in China, it is expected that MIC Model 3 will reduce production costs by 20-28% compared to the US version. If the desire for a similar gross margin is similar to the American version (about 19%), the domestic version will have a price reduction of 27% to 34%.
MIC Tesla has created serious competition for electric vehicles in the Chinese market. It is undeniable that Tesla’s domestic price reduction will have an impact on the new electric vehicle industry, which is largely cost-effective and will even lead to shifts in the industry.
Featured image: Dennis Chang/Twitter
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About the Author
Eva Fox joined Tesmanian in 2019 to cover breaking news as an automotive journalist. The main topics that she covers are clean energy and electric vehicles. As a journalist, Eva is specialized in Tesla and topics related to the work and development of the company.