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Tesla

Not until 2020 – comments by Musk on Tesla’s Shanghai factory hit suppliers’ and property stocks

Electric car maker to start China production in three years, says chief executive

PUBLISHED : Thursday, 02 November, 2017, 2:28pm
UPDATED : Tuesday, 03 July, 2018, 8:22pm

Shares in Tesla suppliers and a Shanghai real estate developer plunged on Thursday, following comments by Tesla chief executive Elon Musk that the electric car maker would not open a widely anticipated factory and make cars in China until 2020.

Musk said on Wednesday during an earnings call that the company was still three years away from starting production in China.

“Don’t set your watch by this,” Musk said. “There’s a rough target of starting production in the next three years, and it will be serving the China market and some of the surrounding region.”

Shares in Ningbo Xusheng Auto Technology, an electric car parts manufacturer and major Tesla supplier, plummeted the maximum allowed 10 per cent to 52.25 yuan in Shanghai. Tianjin Motor Dies stock also plunged 10 per cent to 7.93 yuan in Shenzhen and was suspended from trading.

Shanghai Lingang Economic Development Group, a government-owned developer of industrial parks in Lingang district, also sank 10 per cent to 30.45 yuan in Shanghai.

The losses pared gains made by these stocks in the past two weeks.

Tesla reportedly reached an agreement with the Shanghai government last month to build a fully owned factory in Lingang district, located in Shanghai’s free trade zone, according to The Wall Street Journal. Although the company is still likely to incur China’s 25 per cent car import tariff, this move is expected to help Tesla slash manufacturing and shipping costs, and make its cars more affordable for consumers in the world’s largest car market.

Musk said the planned China factory is likely to focus on building the new Model 3 sedan and the upcoming crossover Model Y, and this will make the vehicles more affordable for Chinese consumers. The production capacity will be “at least a couple of hundred thousand vehicles per year, maybe more”.

Other stocks affected by Musk’s comments include Shanghai Baolong Automotive Corporation, which supplies tyre-pressure monitoring systems to Tesla, declining 4.9 per cent to 59.85 yuan. VT Industrial Technology, a supplier of stamping dies to Tesla, fell 3.6 per cent to 65.75 yuan.

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