Background and land purchase (2018) Tesla Shanghai Co., Ltd., a subsidiary of the electric automaker, was formally established 8 May 2018. In July 2018 Tesla CEO
Elon Musk signed an agreement with the Shanghai regional government to build its third Gigafactory, and the first in
China. In part due to the good relationship Musk had built with the government, it was permitted to be structured as a wholly owned subsidiary of Tesla and not operated as a joint venture with a Chinese company, the first time the government had allowed such an arrangement for a foreign automaker. While Tesla owns the factory, it does not own the land it is built on, as is typical in China. The government granted Tesla land use rights with an initial term of 50 years. To finance the plant, Tesla received in loans from Chinese banks at favorable interest rates, and in grant funding. The local Shanghai government granted Tesla a corporate income tax rate of 15% for 2019 through 2023, compared to the typical 25% rate in China. Having a factory in China also allows the company to avoid tariffs on vehicles imported from the U.S. In exchange for the land grant and government support, Tesla was required to spend in capital expenditures per
mu (per ) by the end of 2023, equating to a total minimum investment of (). The factory is also required to generate of annual tax revenues starting at the end of 2023. On 8 August 2018,
compulsory purchase order Shanghai [2018] was issued by Pudong New Area Planning and Land Administration, with a closing date for objections of 14 August 2018, and finalization scheduled to occur on 20 August 2018. On 26 September 2018, the bidding process for the newly acquired plots Q01-05 in the area designated as 04PD-0303 were advertised, with the restriction that the land be used for
electric car manufacturing, with a minimum investment requirement. The bidding process ran between 17‒26 October 2018, with the proviso that if there was only one bidder meeting the requirements by 11:30 on 17 October 2018, then the process could be closed and finalized early. Tesla won the long-term lease for of land in
Lingang,
Shanghai on 17 October. Tesla (Shanghai) was the only bidder, with its bid of 973 million
Chinese yuan for the 50-year lease covering the site, with the capital coming from local Chinese banks. The Shanghai Land Transfer contract with Tesla (Shanghai) required construction work to begin within 6 months, and be completed within 30 months, with production started after 36 months, and full minimum tax revenues being paid after 60 months. The Land Transfer was scheduled to occur on 12 December 2018, and limits the with a maximum height of . Phase 1 of the project will manufacture
Tesla Model 3 and
Tesla Model Y cars, with a target production rate of 250,000
electric cars per year.
Capital expenditures covering the land purchase and initial design costs for were scheduled to occur in the fourth quarter of 2018. The purchase was aided by a loan from Chinese banks, and converted to a $1.4 billion loan in late 2019, also by Chinese banks.
Construction and delivery (2019) A construction permit was granted by the Shanghai municipal government authorizing work to begin after 29 December 2018. The project contractor is
China Construction Third Engineering Bureau Co., Ltd., part of
China State Construction Engineering, a large state-owned construction company. The factory site is in the Lingang Industrial Zone within the
Pudong district of Shanghai, with the western edge bordering the
Fengxian district. By December 2018, construction activity at the site was underway with
site grading. Shanghai Mayor
Ying Yong visited the site on 5 December. A subsidiary of
China Minmetals was making preparations for piling foundations. On 7 January 2019, the groundbreaking ceremony was held. By March, foundation work in some areas of the large facility was in place and
structure is being erected, with crews operating at the site on multiple
shifts to accelerate construction. By early August 2019, the building exteriors were nearly complete, and the general assembly building was being fitted with manufacturing equipment, with a target to begin production in November. The plant received its "comprehensive acceptance certificate" on 19 August. In the 3Q2019 quarterly investor call on 23 October 2019, Tesla reported that it is ahead of schedule with getting the factory into production. Moreover, it was built in just ten months, is ready for production, and was built for approximately 65% less
capital expenditure per unit of manufacturing capacity than had been the Model 3 production system in the US.
General assembly of the initial
Tesla Model 3s was operating by October 2019, with 30% of the car coming from China.
Expansion (2021) In April 2021, local reports have noted that preliminary work on the new site south of the main complex has been going on for some time. Tesla was the sole bidder for the land, and while the bidding process Gigafactory produced vehicles and the Model Y at a rate of about 450,000 cars per year, the expanded site is already being prepared for construction. Expansion of Giga Shanghai was briefly halted in 2023 after the
Chinese central government expressed concerns with Elon Musk's activities at
SpaceX, in particular the quickly expanding
military applications of Starlink and its potential impact on global strategic defense. == Production ==