Tesla will build cars in China within 4 years, says Musk

Production in China would allow Tesla to sell cars at cheaper prices by avoiding the nation's 25 percent import tariff.
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BEIJING (Bloomberg) -- Tesla Motors Inc. CEO Elon Musk, who’s preparing to begin deliveries of the Model S electric vehicle in China, said he expects to 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, he said at a packed Geekpark Conference in the nation’s capital today. Musk is scheduled to host an event tomorrow to mark the beginning of Model S deliveries 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 United States 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.

“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 United States 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.

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

Tesla has been taking orders since August and opened an 8,600-square-foot store in a Beijing shopping mall late last year to showcase its vehicles.

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 lottery

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.

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.

Tesla aims to increase global sales 56 percent this year to 35,000 Model S cars. The company’s assembly plant in Fremont, Calif., is big enough to produce 500,000 vehicles a year.

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