Tesla Breaks Ground In China, Set To Finish Construction By Summer

After a long wait and few timeline details, Tesla Inc TSLA has finally begun construction on its Shanghai gigafactory.

CEO Elon Musk clarified Monday that the factory should begin production on Models 3 and Y for greater China by the end of this year.

“Aiming to finish initial construction this summer, start Model 3 production end of year & reach high volume production next year,” Musk said in a tweet.

Why It’s Important

Analysts consider the new assembly line critical to the bull thesis as it reduces barriers to and lends Tesla a competitive advantage in the world’s largest auto market.

With China’s first wholly foreign-owned auto plant, Tesla will circumvent high import tariffs and bolster its international margins as competitors Ford Motor Company F and General Motors Company GM suffer regional declines. Lower-cost sales allow Tesla to cut its international price and capture a broader consumer group.

“Shanghai Giga will produce affordable versions of 3/Y for greater China,” Musk tweeted Monday, noting the U.S. sites will continue to construct higher cost versions and all Models S and X for the global market.

What’s Next

Whether Tesla will pursue a capital raise for the new factory remains a matter of speculation.

At time of publication, Tesla shares traded up 4.1 percent at $331.12.

Related Links:

What China's Proposed 50% Cut To Car Purchase Tax Could Mean For Automakers

Tesla Makes Progress On China Gigafactory, Seeks Contractor Bids