Tesla buys Chinese land for new $5bn EV factory

Tesla vehicles wearing a made in China sticker could be headed our way after news the US company is set to hand over $200 million to buy a plot of land for a new $5 billion factory producing half a million Teslas a year.

The land just outside Shanghai would be the base for Tesla’s first overseas operation and would see them get around 40 per cent Chinese tariffs currently placed on cars made in the US.

The new factory would also likely be the birthplace for all Australian Teslas once it is up and running with costs and delivery times slashed thanks to lower operating costs and the plant’s relative closeness to our shores.

It would also likely put the nail in the coffin of any Australian-based Tesla factory, but the move could also have a positive flow-on effect for Australian car buyers, with cheaper Teslas available and in far greater numbers than currently.

The carmaker is the only bidder for the plot of land with an auction price of about $US145m and a decision by the Shanghai government to give the land to Tesla will be made this month.

In July, Tesla reached an in-principle agreement with Shanghai authorities to build a factory that the electric-car pioneer has said will eventually produce 500,000 battery-powered vehicles annually, more than its Californian plant has made.

Setting up manufacturing in China would see Tesla avoid import duties as high as 40 per cent and it would also mean cheaper electric cars for the Chinese market – the world’s biggest market for electric vehicles.

The carmaker is considering raising some of the $5 billion it intends to invest in the plant near Shanghai from local partners.

Tesla’s Elon Musk previously told financial analysts he believed it would take about US$2 billion worth of investment for the factory to be able to produce around 250,000 vehicles a year, with plans to ramp that up to 500,000 annually.