As the US-China trade talks began, electric car maker Tesla CEO Elon Musk on Monday laid the foundation of a Tesla Gigafactory in Shanghai — the first-ever outside the US — that is expected to produce 500,000 electric vehicles per year and double the production capacity of Tesla.
Musk attended the ground-breaking ceremony of Tesla Gigafactory with Shanghai Mayor Ying Yong.
“Aiming to finish initial construction this summer, start Model 3 production end of year & reach high volume production next year,” Musk tweeted earlier in the day, adding that “Shanghai Giga production of Model 3/Y will serve greater China region”.
“Shanghai Giga will produce affordable versions of 3/Y for greater China. All Model S/X & higher cost versions of Model 3/Y will still be built in US for WW market, incl China,” he further tweeted.
According to reports, the Tesla Gigafactory is the biggest foreign investment in Shanghai.
Tesla’s first Gigafactory in Nevada produces Model 3’s drive units and battery packs. The Shanghai Gigafactory is set to be equipped with production lines for both batteries and electric cars.
According to a report in teslarati.com, by producing its lower-end Model 3 and Model Y in Shanghai, Tesla would be able to price the vehicles very competitively in the country — regardless of the presence of a trade war between the US and China.
Bullish on his Chinese dream, Musk last July said he aims to invest long-term in the country and signed a preliminary agreement with the Shanghai government to build a Tesla Gigafactory.
Musk had earlier said that China’s progress in advanced infrastructure is “more than 100 times faster than the US”.
According to a CNN report on Monday, Tesla is forging ahead in China “at a tricky time for both the company and the country”.
“China’s slowing economy and its trade war with the United States have hit the auto industry hard, with companies including General Motors (GM), Ford, Jaguar Land Rover and Volkswagen all reporting a slide in sales recently”.
“Tesla’s own prices in China have fluctuated wildly, with the company slashing prices several times last year even after China increased tariffs on imported US vehicles,” the report added.
Tesla has also cut its US prices by $2,000 as the federal tax credit granted to its buyers gradually gets reduced and phased out. (IANS)
China is expected to report Monday that economic growth cooled to its slowest in 28 years in 2018 amid weakening domestic demand and bruising U.S. tariffs, adding pressure on Beijing to roll out more support measures to avert a sharper slowdown.
Growing signs of weakness in China, which has generated nearly a third of global growth in the past decade, are stoking worries about risks to the world economy and are weighing on profits for firms ranging from Apple to big carmakers.
Chinese policymakers have pledged more support for the economy this year to reduce the risk of massive job losses, but they have ruled out a flood of stimulus like that which Beijing has unleashed in the past, which quickly juiced growth rates but left a mountain of debt.
Estimated 2018 GDP: 6.6 percent
Analysts polled by Reuters expect the world’s second-largest economy to have grown 6.4 percent in the October-December quarter from a year earlier, slowing from the previous quarter’s 6.5 percent pace and matching levels last seen in early 2009 during the global financial crisis.
That could pull 2018 gross domestic product (GDP) growth to 6.6 percent, the lowest since 1990 and down from a revised 6.8 percent in 2017.
With stimulus measures expected to take some time to kick in, most analysts believe conditions in China are likely to get worse before they get better, and see a further slowdown to 6.3 percent this year. Some analysts believe real growth levels are much weaker than official data suggest.
Even if China and the United States agree on a trade deal in current talks, which is a tall order, analysts said it would be no panacea for the sputtering Chinese economy unless Beijing can galvanize weak investment and consumer demand.
Prevent deflation, recession
Chen Xingdong, chief China economist at BNP Paribas, said investors should not expect the latest round of stimulus to produce similar results as during the 2008-09 global crisis, when Beijing’s huge spending package quickly boosted growth.
“What China can really do this year is to prevent deflation, prevent a recession and a hard landing in the economy,” Chen said.
On a quarterly basis, growth likely eased to 1.5 percent in October-December from 1.6 percent in the preceding period.
China will release its fourth-quarter and 2018 GDP data Monday (0200 GMT), along with December factory output, retail sales and fixed-asset investment.
Since China’s quarterly GDP readings tend to be unusually steady, most investors prefer to focus on recent trends.
Hints economy cooling quickly
Surprising contractions in December trade data and factory activity gauges in recent weeks have suggested the economy cooled more quickly than expected at the end of 2018, leaving it on shakier footing at the start of the new year.
Sources have told Reuters that Beijing was planning to lower its growth target to 6-6.5 percent this year from around 6.5 percent in 2018.
Tepid expansion in industrial output and weaker consumer spending is squeezing companies’ profit margins, discouraging fresh investment and raising the risk of higher job losses.
Some factories in Guangdong, China’s export hub, have shut earlier than usual ahead of the long Lunar New Year holiday as the tariff war with the United States curtails orders. Others are suspending production lines and cutting back on workers’ hours.
If the trade war drags on, some migrant workers may not have jobs to return to.
Trade talk deadline
Trade negotiators are facing an early March deadline and Washington has threatened to sharply hike tariffs if there are no substantial signs of progress.
So far, Chinese policymakers have fast-tracked construction projects and cut taxes and some import duties to spur demand.
To free up more funds for lending, particularly to more vulnerable smaller firms, the central bank has cut the amount banks need to set aside as reserves (RRR) five times over the past year, and guided borrowing costs lower.
Further RRR reductions are expected in coming quarters, but most analysts do not see a cut in benchmark interest rates just yet, as policymakers wait to see if earlier steps begin to stabilize conditions. More forceful easing could pressure the yuan and aggravate high debt levels, with money going into less efficient or speculative investments.
The government may unveil more fiscal stimulus measures during the annual parliament meeting in March, including bigger tax cuts and more spending on infrastructure projects, analysts say.
Some China watchers believe the government could deliver 2 trillion yuan ($295.13 billion) worth of cuts in taxes and fees this year, and allow local governments to issue another 2 trillion yuan in special bonds largely used to fund key projects.
Still, some analysts do not expect the economy to bottom out convincingly until summer. (VOA)