Tesla's (TSLA) Plans For China Plant Will Lower Costs For Hip Beijing Drivers

 @SophieXSong
on April 22 2014 9:14 AM
  • Tesla Model S (for 1.14 mag)
    A man walks by a Tesla Model S in Beijing. Reuters/Kim Kyung-Hoon
  • Tesla Motors Logo
    The Tesla logo is shown on the front of a new Tesla Model S car at a Tesla showroom on Nov. 5, 2013, in Palo Alto, Calif. Getty Images
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Hip Beijing drivers can breath a sigh of relief, not due to any easing of the nation's noxious air pollution but because soon they'll be able to avoid a 25 percent import tax on Tesla electric cars when the company opens a plant in China sometime in the next few years.

Tesla Motors Inc. (NASDAQ:TSLA) CEO Elon Musk said on Monday that the company will begin manufacturing its electric vehicles in China within the next three to four years, and it will build a network of charging stations that will be independent from China's main power grid, which is run by the State Grid Corporation of China (SGCC).

“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.”

Musk introduced the Model S electric vehicle at the Geekpark Conference in Beijing on Monday, and he told reporters on Tuesday that the Palo Alto, Calif.-based company is planning to invest hundreds of millions of dollars in projects located in the country, Bloomberg reported.

Manufacturing cars in China, the world's second largest economy, will allow Tesla to avoid the country's 25 percent import tariff and offer its vehicles at lower prices. The Model S will start at 734,000 yuan ($118,000) in China, compared with $71,000 in the U.S.

Higher prices may be just one of several hurdles Tesla will have to clear to achieve its sales goals in China. Chinese consumer adoption of electric vehicles has been slow in the country so far, as much of the country lacks the infrastructure needed to support them, according to CNN. In its ongoing battle against air pollution, the Chinese government offers subsidies to electric car owners, but that program has not achieved great success thus far.

The company’s plan to build a charging station network might help electric vehicle adoption, but some experts are skeptical.

“Tesla CEO in China, says will build a charging station network independent from State Grid,” Bill Bishop, a China expert and the curator of the popular Sinocism China Newsletter, said on Twitter. “I needed a good laugh this evening.” 

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