Tesla's cars are fast, but they don't compare to the team that built the electric carmaker's
factory in Shanghai, China. The super-team completed the US$2 billion project at record
speed, moving from permitting to final electrical work in just 168 working days!
This is the company's first gigafactory outside of the United States.
The feat made Tesla a Chinese unicorn: It's the first foreign company to wholly own a car
manufacturing plant in the country. Previously, the government required foreign manufacturers to
create a joint venture with a local company or shoulder a 25 percent tax on imports.
The plant officially opened in December 2019 to great fanfare,
complete with an employee wedding proposal and a display event of the first Model 3 electric cars.
Although it was forced to close down on Jan. 29 due to the coronavirus,
the plant was back in business on Feb. 10. Tesla said on an earnings call that the Shanghai outlet
already boasts an annual capacity of 150,000 cars. Soon after came word from China's Global Times
that Tesla had completed the main building in the Shanghai factory's second phase focused on
the production of Model Y cars. That was less than five months after the company had launched
the expansion project, coronavirus be damned. The project signals ambition at Tesla that goes
beyond China. CEO Elon Musk has described the Shanghai factory as the automaker's "template
for future growth." In late May, Tesla broke ground on a gigafactory in Berlin, Germany.
A visit by Musk to England that same month sparked rumors about a gigafactory popping up there.
Over the last few years, there was a lot of turbulence between the U.S. and China,
remarkably in business and trade. Through all of the difficulties, Tesla successfully erected one
of its famed Gigafactories in China in 2018. It's the world's largest emerging market,
worth mention! Besides reducing the price of Teslas worldwide, the Shangai Gigafactory will
also continue to increase employment in China and help the Chinese economy to develop better.
What is a Gigafactory? Tesla has been honored for its innovation
in the electric vehicle market. Every year, Tesla seems to attract higher demand globally. With
demand showing no signs of decelerating, Tesla was forced to reconsider how it handles production.
The Gigafactory works as a production powerhouse to fix the demand problem.
Adding the Shanghai Gigafactory or Giga Shanghai, Tesla now says that it can produce approximately
half a million vehicles per year. Gigafactories centralize production and let more parts be
made in-house. This cuts time and costs, which finally results in lower prices for the consumer.
Tesla also made it supreme to make the Gigafactories as environmentally pleasant
as possible. All three Gigafactories are zero net energy. This means that
they only depend on energy from renewable sources. In the case of Gigafactories,
this means a vast amount of solar power and no harmful byproducts.
How Giga Shanghai Helps Impoverished Chinese Citizens
Perhaps the most prominent way that Giga Shanghai helps is by giving jobs in China. Since its
construction in 2019, the Gigafactory has hired roughly 2,000 people. Many of the jobs are in the
product line, so they are attainable for everyday citizens with no formal secondary education.
In addition to jobs, Giga Shanghai works as a solution to the city's immense pollution problem.
The most impoverished citizens live in the hardest-hit areas. Shanghai usually has an air
quality index that hovers around 150. Good air quality levels indicate an AQI of between zero
and 50. In China, where up to 1.24 million people die from pollution-related illnesses every year,
Giga Shanghai shows that factories can still operate on a massive scale.
Even without relying on fossil fuels and other extendable energy sources.
If the energy technology from Giga Shanghai is utilized in other factories in the city, thousands
of lives can be saved every year. Particularly the lives of the most impoverished citizens who cannot
afford to move out of the most polluted areas. Cutting Costs and Bolstering Relations
Before Giga Shanghai, the world's most popular EV (Tesla Model 3) price remained too high for
many people in China and abroad. With the power to produce the Model 3 in China, production and
transportation costs have been cut across Asia and Europe. Contrasted with the U.S. models,
the production value of the Chinese Tesla Model 3 has decreased by up to 28%. Now evermore, Chinese
citizens can access reliable and clean personal transportation that does not pollute their cities.
Giga Shanghai has also cleared the way for new trade possibilities with European nations.
Now, countries such as Germany, Italy, France, Portugal, and Sweden prefer to purchase Teslas
from China since the price is lower. Trading in bigger volume with developed economies
means that China is crawling closer to becoming a fully developed economy.
Additionally, the locally built car was included on a list of vehicles qualifying for release from
a 10% purchase tax in China. It is also suited for a government subsidy of $3,560 per vehicle.
The subsidies have helped Tesla cut prices. The company announced they would reduce the beginning
price of the Model 3 by 9% to 323,800 yuan and down to 299,050 yuan after subsidies. Prices
will go down further as Tesla is considering further lowering the price of the sedans
by using more local components and reduces costs. About 30% of the parts now used by the Shanghai
facility are sourced locally. The company plans to increase that to 100%.
Those prices put Tesla closer to some models from domestic EV makers, such as Xpeng Motor's
latest P7 sedan, which starts at 240,000 yuan. NIO's SUVs start from 358,000 yuan, though
that price doesn't take into account subsidies. Volkswagen AG's Audi plans to start selling nine
new energy-vehicle models in China during the next two years, with more than half of them being pure
battery-electric. The first electric model, the E-Tron, debuted in November at a starting price
of about 693,000 yuan. Daimler's Mercedes-Benz made its EQC available in October, starting at
580,000 yuan. BMW plans to begin building the iX3 crossover in China next year and is working with a
Chinese partner to electrify its Mini model. Giga Shanghai and the Future
Elon Musk has declared that he would like to see 10 to 20 Gigafactories built throughout
the next couple of decades. So far, things seem to be running smoothly.
Soon, Gigafactories could be appearing in other emerging markets like Mexico, Argentina,
and Morocco. Gigafactories may be a stepping stone to help emerging markets become better developed.
Job creation is a massive benefit of a Gigafactory. They advance industry, create
new opportunities to trade with other countries, and offer a clean option to gas-powered vehicles.
Finally, Gigafactories can serve as a catalyst for global poverty reduction.