Tesla China factory’s expansion plans in doubt amid data concerns
AN EXPANSION of Tesla’s plant in Shanghai has been delayed, according to people familiar with the matter, putting a roadblock in the way of the US electric carmaker’s ambitions to increase its market share in China.
The so-called phase three expansion, originally slated to start mid-year, would have seen the plant’s capacity double to around two million cars a year, the sources said, asking not to be identified because they were not authorised to speak publicly.
Some central government officials expressed concern about a US company with connections to Elon Musk’s Internet-from-space initiative Starlink having such a large presence in Asia’s biggest economy, one of the sources said. Even though Tesla cars are not connected with Starlink equipment, which would allow users to bypass China’s Great Firewall, Beijing has become increasingly concerned about data security and social stability. Musk is also chief executive officer of Tesla.
The delay coincides with growing public resentment towards the US electric vehicle maker at a time when tensions between Washington and Beijing are running high. Angry Tesla owners swarmed showrooms in China over the weekend to complain about missing out on another round of price cuts while Tesla cars were banned from Chinese military complexes and housing compounds in early 2021 due to concerns about sensitive data being collected by cameras built into the vehicles.
Tesla representatives in China did not immediately respond to a request for comment. Representatives from China’s National Development and Reform Commission did not respond to a faxed request for comment.
Phase one and two of Tesla’s Shanghai plant are already complete, with the factory, which broke ground in 2019, now able to produce one million Model 3 sedans and Model Y sports utility vehicles, combined, annually after upgrades in 2022. Phase three would have seen the facility expanded, involving a large amount of additional construction and extra land.
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The future of phase three could still change pending further guidance from senior central government officials, one of the sources said. Tesla has the support of local Shanghai officials, the sources added.
China has become a key manufacturing centre for Austin, Texas-based Tesla, with the Shanghai factory churning out over 710,000 cars in 2022, or around 52 per cent of the company’s worldwide output. But consumer demand in China, the world’s biggest car market and the biggest electric vehicle market, has taken a hit from slowing economic growth and the country’s adherence until only recently to Covid Zero, which resulted in months-long lockdowns and supply chain disruptions.
To combat that, Tesla has cut prices and kept incentives in place. Even so, deliveries slumped in December to around 56,000 units as production was temporarily suspended due to equipment upgrades and lacklustre consumer demand. Local rival BYD meanwhile shipped 111,939 pure-battery electric vehicles last month.
As China stalls, Tesla has been expanding in other parts of Asia, including opening showrooms in Thailand. Bloomberg reported earlier this week that the US carmaker is close to a preliminary deal to set up a factory in Indonesia that would produce as many as one million cars a year, said people familiar with the matter. BLOOMBERG
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