Can Elon Musk's Tesla Bestride the Chinese Automobile Market?

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It has been a good start of 2019 for Tesla founder and chief executive officer Elon Musk. The billionaire entrepreneur has been hogging the limelight after he spoke at the launch of his new Tesla factory project called Tesla Gigafactory 3 in Shanghai. The factory is currently under construction and will start producing battery cells by the end of 2019 along with Tesla Model 3 and Tesla Model Y cars, at an initial production rate target of 250,000 electric cars per year.

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Affordable Cars for China

The Shanghai regional government approved the agreement to build the production facility in July 2018, and a long-term lease of land was signed for 210 acres (85 ha) in October 2018. The construction for the factory began in December, three months after Tesla won the long-term lease for 210 acres (85 ha) of land in Lingang, Shanghai, with the installation of secure fencing and site offices.

A construction permit was granted by the Shanghai municipal government authorizing work to begin after 29 December 2018, for a period of 180 days. The project contractor is China Construction Third Engineering Bureau Co. Ltd. part of China State Construction Engineering, a large state-owned construction company

“Aiming to finish initial construction this summer, start Model 3 production end of the year and reach high volume production next year. Shanghai Giga production of Model 3/Y will serve greater China region,” Musk tweeted.

For Tesla, the factory will be the first manufacturing plant outside the US. Musk also tweeted ahead of the event, “Shanghai Giga output is just for greater China, not North America. Affordable cars must be made on the same continent as customers.”

Looks like the new plant will produce affordable cars for Chinese consumers.

Eyeing the Chinese Market

For Tesla, cracking the Chinese automobile market won’t be easy. China, the world's biggest car market, is home to some big players like AIC, FAW, GAC Group, Dongfeng, Geely, Changan etc. According to a study by Bain & Company, China has quickly emerged as the world’s largest mobility market. Innovations in automotive, technology and e-commerce are rapidly converging in new, unexpected ways. Chinese consumers, who lead most other countries in digital adoption, are willing to try new options that are becoming available at a record pace and are upending the definition of mobility. 

"The mobility ecosystem is growing and taking shape, and as it does, one message is becoming clear. Outpacing rivals will mean creating the right alliances to build the needed capabilities while carefully managing the risks that are inherent with any new and dynamic industry. In the world’s largest mobility market, no company will be able to win alone," the report states.

It will be interesting to see if Musk's Tesla will have a successful debut in China's booming automobile market.