Tesla to Open New Plant in Shanghai

The leading EV maker reportedly has plans to more than double its production capacity to meet demand.
Feb. 25, 2022 18:43
Tesla to Open New Plant in Shanghai

(CapitalWatch, Feb. 25, New York) Tesla (Nasdaq: TSLA) plans to open a new, second production plant in Shanghai in order to meet the booming demand for electric vehicles in China.

Sources told Reuters that the company could start building the new facility as early as next month. The new plant could give Tesla the capacity to produce more than 2 million cars per year in China, more than doubling its output. However, the South China Morning Post found that this figure is likely a long-term goal and not the immediate capacity upon the plant's opening. 

The new capacity would heavily outpace other foreign companies in China, the world's largest auto market. According to Reuters, Toyota (NYSE: TM) produced 1.6 million vehicles in China in 2021, General Motors (NYSE: GM) made 1.4 million with its Chinese partner SAIC Motor Corp, and Volkswagen (OTC: VWAGY) plans to make 1 million electric vehicles in China by 2023.

The new factory would reportedly be located near Tesla's completed Gigafactory 3, which was fully completed in just over a year and began delivering cars to mainland customers in 2020. Tesla said that last year, Gigafactory 3 delivered over 484,000 vehicles, over half of the company's global total for the year. The company has confirmed plans to increase capacity at this plant with a $190 million investment.

China has been effectively pursuing global leadership in EV production. And while foreign auto giants flock to the country as a manufacturing hub, domestic automakers have a strong grip on the mainland market. Local industry leaders Nio (NYSE: NIO), XPeng (NYSE: XPEV; HKEX: 9868), and Li Auto (Nasdaq: LI; HKEX: 2015) closed 2021 with record-setting figures and saw a promising start to 2022 with their January figures. 

All three of the Chinese Tesla rivals saw robust sales last month, with XPeng and Li Auto more than doubling deliveries and Nio sales growing by around 33%. Overall, EV sales in 2021 more than doubled in the fiercely competitive market and, according to the China Passenger Car Association, deliveries of electric vehicles could grow 84% this year to reach 5.5 million units.

Tesla inched 1% higher as of  Friday afternoon, at $806.59 per share.