Tesla kicks off bidding to build Gigafactory in China as trade war bites

Shanghai

TESLA Inc has opened a tender process to build its Shanghai Gigafactory, and at least one contractor has started buying materials, going by sources and documents reviewed by Reuters, the clearest indication that construction is imminent.

The details, previously unreported, reveal that state-owned Shanghai Construction Group Co Ltd is taking part in the bidding, and a unit of China Minmetals Corp Ltd is preparing materials for the plant's foundations.

The US$2 billion factory, Tesla's first in China, is a major bet for the American electric vehicle (EV) maker as it looks to bolster its presence in the world's biggest auto market, where its earnings have been hit by increased tariffs on US imports.

The so-called Gigafactory would also be China's first wholly-foreign-owned car plant, the progress of which is widely seen as a reflection of Sino-US relations and also the degree to which China is opening up its markets.

Tesla, led by billionaire chief executive Elon Musk, has begun seeking bids from companies looking to build the plant, according to two people with knowledge of the matter and a construction document on an official local bidding platform.

Shanghai Construction Group is among several firms bidding, the two people said, declining to be identified because the information is not public.

Shanghai Baoye Group Co Ltd, a China Minmetals subsidiary, is preparing for the delivery of a large amount of concrete pipe piles and steel pile tips in the second half of December, showed a document on the metals giant's website.

Tesla declined comment.

Shanghai Construction Group did not respond to a request for comment. An official at Baoye parent China Metallurgical Group Corp, a Minmetals firm, confirmed involvement.

Tesla is facing rising competition in China from a swathe of domestic EV makers. Its sales tumbled after China raised tariffs on US-built cars, prompting the automaker to cut prices to keep its models affordable.

In moves which would further lower prices, the automaker has said that from next year, it aims to produce its Model 3 mass-market car at the new plant - Tesla's first Gigafactory outside of the United States - and localise its manufacturing and supply chain.

Shanghai's government, in a statement on its official WeChat late on Wednesday, said Mayor Ying Yong had visited the site of the Gigafactory and that preparation work was nearly complete and construction would start soon.

Mr Ying urged the firm to "accelerate" work on the factory and said production would start to some degree in the second half of next year, the statement showed.

A member of the community at Lingang near the plant's 860,000 sq m site - which Tesla secured in October - said work on ground preparation and fencing appeared nearly complete.

"Workers work very hard on this," the person said. "Sometimes they work until 10 pm at night." REUTERS