Good news for domestically produced Tesla is coming soon. Analysts say that it is a foregone conclusion that the domestic production will be launched this year

Although Tesla has repeatedly denied rumors about the domestic production of Tesla, this time it may really become a reality. On June 20, the news that Tesla's domestic production will be "signed within this week" was circulated in the industry, and the topic of Tesla's domestic production has once again become a hot topic. It is reported that "the American electric car company has reached an agreement with the Chinese side to produce electric vehicles in China. Tesla has completed negotiations with the Shanghai Lingang Development Zone, but the content of the negotiations is unknown. The details of the agreement between the two parties are being finalized and may be announced this week." However, as of press time, Tesla and Shanghai Lingang (23.380, -0.70, -2.91%) have not responded to the above news, and Lingang Group has not issued a clarification announcement. Industry insiders believe that the news of the signing has yet to be confirmed, but Tesla's domestic production this year is a foregone conclusion, it is just a matter of time before it is announced.

Joint venture gate

The rapid spread of news about Tesla's localization is related to the latest industrial policy release. According to the previous "Automotive Industry Development Policy", if overseas car companies want to enter the domestic market, they need to form joint ventures with domestic car companies, and the Chinese shareholding ratio must not be less than 50%.

On June 12, the National Development and Reform Commission and the Ministry of Industry and Information Technology issued the "Opinions on Improving the Management of Automobile Investment Projects", which clarified that new Sino-foreign joint venture pure electric passenger car enterprise projects will not be subject to the "Automotive Industry Development Policy" on the approval of Sino-foreign joint venture car projects and the number of enterprises. In June this year, Volkswagen established JAC Volkswagen Automotive Co., Ltd. in a joint venture with Anhui Jianghuai Automobile Co., Ltd., each holding a 50% stake, to carry out the research and development, production and sales of new energy vehicles. This undoubtedly allows overseas automakers to see a new path for domestic production. Previously, the relevant person in charge of Tesla China had publicly stated that it was certain that Tesla would build a factory in China, and Tesla needed to establish a joint venture with at least one local partner in accordance with the requirements of the Chinese government, but there was no timetable.

It is reported that Tesla China has already transferred some employees to the south to plan domestic production matters. In addition to Shanghai Lingang, Suzhou, Guangzhou and Shanghai Jinqiao have all had scandals with Tesla. In comparison, Lingang's main industrial zone focuses on supporting new energy projects, and the logistics park has a bonded nature. Their positioning is consistent with Tesla.

It is worth noting that the joint venture partner with Tesla has not yet surfaced. It was previously revealed that SAIC, JAC, BYD (50.680, 0.10, 0.20%) and other companies may become Tesla's joint venture partners, but in the end these rumors have been refuted.

Capacity bottleneck

In the view of Cui Dongshu, secretary general of the China Passenger Car Association, localization is the key for Tesla to continue to grow in the Chinese market. China has listed new energy vehicles as a strategic emerging industry and plans to increase annual sales of plug-in hybrid vehicles and all-electric vehicles by 10 times in the next decade. Tesla hopes to enter the mass consumer market, and reducing vehicle costs is crucial to the realization of this plan.

It is understood that insufficient productivity has always been Tesla's most difficult problem. Last year, the total production of all Tesla models was 85,000. However, the global order volume of the low-end Model 3, which is about to be delivered, has reached 400,000.

At present, China's dense upstream and downstream automobile manufacturing industry chain helps Tesla improve its production efficiency. Tesla founder Elon Musk previously said that the company's goal is to increase production by 7 times to 500,000 vehicles by 2018. In Tesla's plan, as the world's largest new energy vehicle market, the Chinese market will take on more sales responsibilities.

Some analysts believe that building a factory in China will help Tesla alleviate the production constraints of Model 3. Due to insufficient production capacity and other issues, the company can only deliver Model 3 in the order of the West Coast of the United States, the East Coast, Europe, and other regions (including China). This means that the waiting period for Chinese car buyers will only be longer. If Model 3 is produced in China first, it will not only greatly shorten the time for Chinese consumers to pick up the car, but also help Tesla achieve its production target of 500,000 vehicles.

Price advantage

In fact, import prices have also become a major factor hindering Tesla's sales growth. Although Tesla's low cost of use and brand appeal have attracted many middle-income families, Tesla's price is not competitive compared to domestic models such as Mercedes-Benz, BMW, and Audi.

Tesla's prices in China are still about 40% higher than in the U.S. For example, a $70,000 Model S costs about 700,000 yuan in China, and the $35,000 Model 3 that is about to be delivered costs at least 350,000 yuan in China.

Industry insiders estimate that Tesla's opening of a factory in China will significantly reduce the price of its products in China. Tesla's opening of a factory in China will reduce the freight and import taxes currently included in the price, and the final price is expected to be reduced by 1/3. The price of the Model 3 after domestic production is also expected to enter the 300,000 yuan range.

"Tesla has always been a benchmark for new energy vehicle companies. Compared with Chinese brand pure electric vehicles, Tesla has advantages in brand, workmanship and endurance." Cui Dongshu said that once Tesla is localized, it will not only have an advantage in price, but will also force the industry to upgrade at the technical level, eventually forming a "catfish" effect.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.