Tesla prepares for Giga Shanghai phase 3 expansion to produce 25,000 USD vehicle

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Tesla is planning to restart construction of the third phase of the Giga Shanghai factory, which is dedicated to producing a new 25,000 USD vehicle, local media reported.

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In April, Tesla announced it would build a new energy storage factory in Shanghai with an annual output of 40 GHw, starting production in the second quarter of 2024. At that time, Tesla didn’t mention any plans for phase 3 of the Giga factory expansion.

People familiar with the matter confirmed that Tesla started preparations for phase 3 in 2021 and formed a team but suspended the actions in the summer of 2022. The team responsible for factory expansions has been transferred to other departments.

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According to Late Auto Post, the production capacity of the third part of Giga Shanghai will be dedicated to a new 25,000 USD (150,000 yuan) vehicle, which Tesla teased in 2020 and is essential to reach the company’s target of 20 million EVs sold annually by 2023.

Tesla’s Shanghai plant produces only Model 3 and Model Y. It has an annual capacity of 1.1 million units, and between January and November, it delivered 853,603 vehicles, up 30% from the same period last year. Shanghai is Tesla’s most efficient production plant. It takes 76 seconds for Tesla’s Texas factory to roll off a car, while it takes only 37 seconds for the Shanghai factory.

The 40 GWh Megafactory in Shanghai, as Tesla calls its energy storage plants, will be the first outside the US market. It will produce energy storage for global and domestic markets. Late Auto reports unnamed sources saying that Tesla will initially buy cells from CATL before switching to its batteries.

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Bloomberg reported in January that Tesla planned to boost the output of the Shanghai plant to 2 million EVs a year, starting the phase-three mid-year, but the plan was put on hold because of Chinese government concerns over Musk’s Starlink.

Elon Musk, Tesla’s CEO, said in an interview on December 5 that “significant progress has been made” in the mass production of this new 25k USD model. According to previous information from the supply chain, this car will not be delivered until mid-2025 at the earliest.

Tesla is facing brutal competition in China. Model 3 sales declined during 2023 as dozens of other 200k – 300k yuan electric sedans ate their market share, such as BYD Seal, BYD Han, and Deepal SL03. As the China-made 2024 Model 3 is currently mainly for export, we don’t know yet how Chinese customers will welcome it. Model Y is holding pretty well, and Tesla China sales rely heavily on the electric SUV. However, many Chinese EV makers are preparing their 250k yuan electric SUV for 2024. We will keep an eye on it.

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