Tesla hit a major milestone in its China expansion when it delivered its first locally made cars to 15 employees last week. The company only broke ground on its Chinese Gigafactory a year ago. Today, it is nearing full production.
Although deliveries are only just beginning, Tesla has already cut its prices for the Chinese market. With government subsidies set to take effect soon, Model 3 cars in China will be some of the most affordable in the world.
Proof That a Chinese Factory Was the Right Decision
It only took Tesla ten months to complete its manufacturing plant in Shanghai. It has been taking customer orders for Model 3 cars in China since the end of October. As the world’s largest electric vehicle market and the largest car market overall, China was the ideal place for Tesla to expand.
With a local production facility, the company will avoid heavy tariffs that are usually placed on U.S. automobiles. If trade tensions worsen, Tesla won’t be impacted.
The starting price of a Chinese made Tesla Model 3 is now 323,800 Yuan, equivalent to $46,400 USD. Base models were originally priced at 355,800 Yuan, equivalent to $51,000 USD.
Things will get even better in the coming months. Government subsidies will eventually kick in, which will price the base model at 299,080 Yuan, equivalent to $42,900. Although the subsidies won’t last forever, they will be important for Tesla to build its market position.
In the U.S. market, subsidies were able to boost sales and generate a higher level of consumer interest.
Tesla Still Has a Challenge Ahead
Tesla’s stock is strong today, even as tensions in the Middle East threaten to stifle market growth this week. Investors have more confidence in the company now that it has matured its manufacturing process, increased its output, and generated solid earnings in recent quarterly reports.
The Chinese market will be one of the most important ,, but it will compete with lower-priced, locally made alternatives. By cutting prices, the Model 3 is now more attractive. Tesla also has an advantage with its strong brand image and globally renowned electric vehicle technologies.
Any investor considering stock in the company can take confidence from Tesla’s continued expansion, and aggressive moves to embed itself in the highly important Chinese Market.
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