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Tesla Gigafactory 3 is Thriving Thanks to Open Support from China

by Claribelle Deveza October 23, 2019

Tesla-Gigafactory-3

Tesla Gigafactory 3 has been beating each of Elon Musk’s ambitious deadlines since its inception. The support from the Chinese government seems to have helped Tesla meet its goals for the Shanghai-based manufacturing facility.

Tesla's Q3 2019 was quite impressive, with the company posting US$6.3 billion in revenue and US$143 million in net income. Shareholders of the company also saw earnings per share of US$1.91, beating analyst estimates of -US$0.46, according to data from FactSet.

More importantly, Tesla attained GAAP profitability. Some analysts believe the electric car company’s global ramp will play a significant role in their climb to be a self-sustaining business. Gigafactory 3 may be the key to Tesla’s global growth.

Elon Musk set an ambitious goal for the company, predicting that Tesla will have a run rate of about 500,000 vehicles annually by the end of 2019. The company’s attempts to build factories in other countries may be a big part of that plan, specifically Gigafactory 3 in Shanghai, China.

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Not all analysts have faith that Gigafactory 3’s production will be ready in time to meet Musk’s predictions. One such analyst is Tu Le, who works at Sino Auto Sights, a China-based auto firm.

Le told Reuters: “There is a lot in the equation that is not in their control. There are some things that just need time in order to complete, like qualifying new manufacturing processes, a new battery supplier, getting the tooling shipped and set up, as well as setting up all the suppliers. Any parts that have to be imported need to go through customs, which also could mean delays.”

Like many analysts who share his perspective, Le doesn’t seem to consider the amount of support the Chinese government has been giving Tesla thus far. However, some do, like Morningstar equity analyst, Ivan Su.

Su told Bloomberg: “What surprised me is how little time it took for the regulatory process to get approved by the Chinese government. When they want to, they can push things through very quickly.”

Tesla-Gigafactory-3-China

Su’s observations aren’t off the mark. The electric car company was able to find and attain a lot thanks to government help. It is the first foreign automaker allowed to operate its own facility in China.  

Tesla had been trying to saturate the Chinese auto market for years prior to the government getting involved. After the Chinese government was on board, the process of setting up an actual factory was smoother, and the whole operation seemed to move at a faster pace.

The Chinese government didn’t stop there, though. It has been with Tesla ever since and has helped them with most of the basic requirements they need to get started, from domestic banks offering low-cost loans to state-owned manufacturers who increased their workforce to accommodate Gigafactory’s ambitious build.

Most recently, the Chinese government exempted Tesla from the 10 percent sales tax, which was only applied to electric cars manufactured by Chinese-owned businesses before. Bloomberg predicts the purchase tax exemption will give the electric car company some edge in the country’s market. When the locally produced Model 3 is released in China, it is predicted to cost roughly CN¥328,000 or about US$46,000.

Tesla’s Shanghai facility was just certified and approved for production. Based on the Q3 notes, trial production has already started. Drone operator WuWa Vision may have confirmed this news after filming a blue Model 3 in the middle of what seemed like a test run beside the factory. As of this report, Tesla is still waiting for its sales certification, allowing it to distribute the Model 3 to the Chinese market.




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