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    Tesla’s Shanghai Gigafactory Ready for Production

    Progress is ‘ahead of schedule’ and Shanghai-made Model 3s will be ready to ship next year, the automaker said in its latest earnings report.

    SHANGHAI — Tesla’s Shanghai Gigafactory has started making cars, according to the U.S. automaker’s third-quarter earnings report.

    Published Thursday, the report said Tesla has already started trial production and is “working towards finalizing the license and meeting other governmental requirements” before beginning its operation in earnest and scheduling deliveries for made-in-Shanghai vehicles.

    Since breaking ground on the Shanghai Gigafactory in early January, Tesla has needed just 10 months to begin cranking out cars “on a trial basis,” according to the report. The company also said the Model 3 vehicles made at the Shanghai Gigafactory will cost 65% less than their counterparts assembled in the U.S.

    The company is pinning high hopes on its Shanghai-made sedans. “With Model 3 priced on par with gasoline-powered mid-sized sedans (even before gas savings and other benefits), we believe China could become the biggest market for Model 3,” Tesla said in its report. The company added that the first batch of vehicles — which became available for preorder Friday, starting at 355,800 yuan ($50,000) — will be ready for delivery sometime during the first quarter of next year.

    The Shanghai Gigafactory will produce at least 1,000 cars a week by the end of this year — a volume that took the company’s first factory in California several months to achieve. Tesla is targeting an annual production capacity of 150,000 vehicles per year in 2020 and as many as 500,000 per year in the future.

    A second building is also under construction at the Gigafactory complex to handle the production of batteries and modules, Tesla CEO Elon Musk said during a conference call after the company released its earnings report.

    Tesla and the Shanghai municipal government signed an agreement to build the Gigafactory in July of last year. A few months later, in October, Tesla was granted use rights to a tract of land in Shanghai’s Lingang New City measuring 864,885 square meters — a larger footprint than Beijing’s Daxing International Airport.

    By breaking ground on the Shanghai Gigafactory in January, Tesla became the first beneficiary of a new policy allowing foreign carmakers to set up their own independent operations in China rather than requiring them to partner with domestic companies as joint ventures. Then in a surprise move in August, Tesla was granted an exemption from the 10% national sales tax levied on vehicles, a privilege previously enjoyed only by domestic companies.

    The third quarter marks the first period this year over which Tesla has turned a profit and just the fifth time since the automaker went public on the Nasdaq Stock Market in June 2010.

    News of the earnings report and the Shanghai Gigafactory revving up seem to have boosted investor confidence, with Tesla’s stock price rocketing up 21% in a single day. The factory’s launch may also be a boon to China’s EV industry, as electric automaker Nio and several automotive parts companies also saw their shares rise following Tesla’s report.

    Editor: David Paulk.

    (Header image: An aerial view of the Tesla Gigafactory in Shanghai, Oct. 25, 2019. Shi Yangkun/Sixth Tone)