Musk Says Tesla Will Make Cars in China in Next 3-4 Years

Tesla Motors Inc. (TSLA) Chief Executive Officer Elon Musk, who’s preparing to begin deliveries of the Model S electric vehicle in China, forecast the company will be making cars in the country in the next three to four years.

The company is also building a “big” network of battery-charging stations in China, including superchargers in Beijing and Shanghai, the billionaire said at a packed Geekpark Conference in the nation’s capital yesterday. Today, he told reporters in Beijing that the company plans to invest hundreds of millions of dollars in the country.

“At some point in the next three or four years we’ll be establishing local manufacturing in China,” Musk said. “China is very important to the future of Tesla. We’re going to make a big investment in China in terms of charging infrastructure.”

Local production in the world’s biggest auto market would allow Tesla to sell cars at cheaper prices by avoiding China’s 25 percent import tariff. While entering the country presents an opportunity for Tesla to sell as many vehicles there as in the U.S. by as soon as next year, Musk, 42, will attempt to accomplish what the Chinese government has struggled to do: get people to buy electric cars.

Photographer: Noah Berger/Bloomberg

Workers add seat belts to a Telsa Motors Inc. Model S sedan at the company's assembly plant in Fremont, California, on July 10, 2013. Close

Workers add seat belts to a Telsa Motors Inc. Model S sedan at the company's assembly... Read More

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Photographer: Noah Berger/Bloomberg

Workers add seat belts to a Telsa Motors Inc. Model S sedan at the company's assembly plant in Fremont, California, on July 10, 2013.

“I think they can sell quite a few here in the market,” said Finbarr O’Neill, president of J.D. Power & Associates. “There’s a lot of talk about Tesla but, you know, their numbers are not huge. Mr. Musk has been successful in many fields. I wish him luck, but there’s a limit to every market.”

Surging Shares

The Model S, when equipped with an 85 kilowatt-hour battery, will be priced from 734,000 yuan ($118,000) in China -- compared with about $71,000 in the U.S. before federal tax credits -- as shipping charges, value-added taxes and import duties increase the price tag. Tesla has said it wants the vehicle to qualify for China’s electric-car subsidies to help offset extra costs associated with selling in the country.

Manufacturing in China would require Tesla to team up with a local company and create a joint venture. Tesla hasn’t held any serious partnership discussions yet and it’s unlikely for the company to make an announcement on the matter for at least a year, Musk said today.

Tesla rose 3.2 percent to $204.38 at the close in New York yesterday. Shares of the Palo Alto, California-based company, after jumping more than fourfold in 2013, have risen 36 percent this year, outpacing a 1.3 percent increase in the Standard & Poor’s 500 Index.

Sales ’Guess’

The company is starting deliveries as the world’s biggest carmakers gather in Beijing to display their latest models at the annual China auto show that opens to the public this week. Tesla didn’t participate in the April 20 media day at the show.

Tesla has been taking orders since August and opened an 800-square-meter (8,600 square feet) store in a Beijing shopping mall late last year to showcase its vehicles. Musk said today he “guesses” Tesla will sell more than 5,000 vehicles in China.

Competing carmakers are watching Tesla’s entry into the country closely. China lags behind its target of 5 million alternative energy-powered vehicles by 2020 as a lack of charging stations and high costs deter buyers, even as air pollution worsens and chokes its inhabitants.

Beijing’s license-plate lotteries underscore the extent of the challenges automakers have had luring electric-car buyers in China. While the city received more than 90 bids for each available permit for conventional gasoline autos in a February drawing, there were only 1,428 applicants for 1,666 new-energy vehicle plates offered, the municipal government said.

China Departure

Tesla moved ahead with its entry into China after losing its general manager for operations there last month. Kingston Chang, who joined Tesla from Volkswagen AG’s Bentley about a year earlier, left for personal reasons, Sina.com reported. His departure was confirmed by Tesla Vice President Veronica Wu.

The fourth-largest U.S. automaker aims to increase global sales 56 percent this year to 35,000 Model S cars. The company’s assembly plant in Fremont, California, is big enough to produce 500,000 vehicles a year.

To contact Bloomberg News staff for this story: Craig Trudell in Tokyo at ctrudell1@bloomberg.net

To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net Chua Kong Ho

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