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October 25, 2019

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Tesla to start production of Model 3 in Shanghai

US electric carmaker Tesla said in it its third-quarter earnings report that it is ready for the production of the Model 3 car at its Shanghai plant.

Tesla’s Shanghai plant has already started the trial production of the Model 3. As it is on the way to finalize certification and license and other administrative requirements, the company is expected to enter into large-scale production and delivery in the near future.

The electric carmaker said that “China is by far the largest market for mid-sized premium sedans. With Model 3 priced on par with gasoline powered mid-sized sedans, we believe China could become the biggest market for Model 3.”

Zach Kirkhorn, Tesla’s chief financial officer, said that Model 3 vehicles made in the Shanghai factory will have roughly the same margins as those made in Fremont, California, Reuters reported.

In January, Tesla broke ground on its Shanghai factory, becoming the first to benefit from a new policy allowing foreign carmakers to set up wholly-owned subsidiaries in China. In July, the city’s development and reform commission said that Shanghai-made Tesla Model 3s would be on sale early next year.

Tesla signed an agreement with the local municipal government in July 2018 to build the factory. In October last year, the company got the approval to use an 864,885-square-meter tract of land in Lingang for its plant, which has an annual production capacity of 500,000 electric cars.

On Wednesday, Tesla Inc surprised investors with a quarterly profit that sent its shares soaring, as Chief Executive Elon Musk promised a 2020 rollout of a cheaper SUV and more self-driving technology to stay ahead of larger rivals rushing into the premium electric vehicle market he created.

Shares rose nearly 21 percent to US$307.12 after hours on the unexpected news, crossing US$300 for the first time since March 1 after record deliveries and cost cuts ensured a profitable third quarter.

Tesla posted a cash balance increase to US$5.3 billion and reported a profit of US$1.86 per share, shattering analyst expectations of a loss of 42 cents per share.

The third-quarter results are an important milestone for Tesla and redemption for Musk who had to step down as chairman after a series of scandals and investor doubts about Tesla’s ability to withstand competition from larger, better capitalized global rivals.

Tesla’s gross margins, an important profit indicator for investors, surpassed expectations and Tesla said it was “highly confident” in exceeding the low end of its yearly global vehicle delivery goal.

“Given the breakneck speed of expansion, Tesla will face significant demands on its cash pile,” said Nicholas Hyett, an analyst at Hargreaves Lansdown.




 

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