Made in China Model 3. Source: Jay in Shanghai/Twitter
Made in China Model 3. Source: Jay in Shanghai/Twitter

Californian electric car maker Tesla will commence making its Model 3 electric sedan at its new Shanghai Gigafactory in China on November 11, according to reports emerging in China today.

As CEO and co-founder Elon Musk announces the unveil of hit “pet project”, the electric Cyber-truck or ute for November 21, it seems next Monday will also hold as a significant day for the pioneering EV maker.

Musk told investors and analysts at Tesla’s Q3 earnings call earlier this month that the Shanghai factory, which has been built in an incredible 10 months time only having had ground broken in January, would open early – but he didn’t give a date for officially commencing production.

Tesla China has posted a cryptic message on local social media that says (translated) “Made in China Model 3 is about to debut, please look forward to it”, and reports of the actual date are now emerging on several Chinese news sites.

There are also some images emerging on Twitter of vehicles made at the new Shanghai, with a Tesla logo in Chinese such as these posted by Twitter use “Jay in Shanghai”.

On Tuesday at an event in Shanghai, however, Tesla chairman and former Telstra CFO Robyn Denholm said only that an official manufacturing licence would be received by the end of 2019, Bloomberg reported.

At the event, Denholm also confirmed that trial production is underway (it is presumed that the vehicles captured in the photo below are some of these).

tesla model 3 shanghai

Once it is up and running in official capacity, production is expected to ramp steadily to 3,000 units, and the annual production capacity of the first phase of the Tesla Shanghai plant is expected to be 150,000 units.

According to Musk, the lessons learned from the Shanghai build will also form a template for its future growth, allowing the carmaker to triple its output and look to the build of a fourth Gigafactory in Europe, the site for which will be announced before the end of 2019.

Battery deals

In order to supply its vehicles with enough batteries for this massive increase in production, Tesla has also been in talks with China’s domestic battery company CATL.

Reports say that a preliminary agreement on the battery supply for the Shanghai factory has already been reached, with further discussions underway for a potential global battery supply agreement.

According to Bloomberg, Musk met for 40 minutes in late August with CATL chairman Zeng Yuqun and it is thought that a final agreement could be reached by mid-2020.

If that were to happen, the long established relationship between the Tesla and Panasonic which has been handling Tesla’s car battery supply chain may face major changes.

It has already been disrupted by the deal Tesla and South Korea battery maker LG Chem which will make batteries for Shanghai-produced vehicles, rumours of which formerly emerged in September and have now been confirmed by Bloomberg.

A global deal with CATL would become the second such agreement for Tesla after Panasonic, and would diversify risks associated with meeting battery demand which could slow production.

However, CATL is known for its prismatic batteries rather than the 21700-type Panasonic cylindrical batteries currently used by Tesla.

Prismatics differ in technical characteristics from cylindrical batteries, not least of which is reduced battery control problems due to the large numbers of cells when using cylindrical batteries.

Use of prismatic cells would likely mean that Tesla would need to rethink how to build the square-shaped batteries into the floor of its electric vehicles.

Using locally made batteries would, however, mitigate certain risks such as trade tariffs and import costs, and allow the EV maker to reduce the average selling price (ASP) of its China-made vehicles.

With Volkswagen poised to ramp up its own Chinese manufacturing facilities for its electric ID series, any tactical advantage would be of consequence (as has been Tesla’s acquisition of battery makers Maxwell and more recently Hibar Systems).

It would also go a long way to ensuring the EV maker’s continued growth, as was seen in the latest Q3 earnings reporting and which is seeing financial firms change their view on Tesla, such as Brazilian bear Adam Capital which on Tuesday (US time) scrapped its short position noting improving operations efficiency.

This was followed by S&P Bond, which on Wednesday revised its outlook from negative to positive according citing “recent debt reduction and stronger-than-expected cash flow”.

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