Tesla Inc. plans to invest as much as 1.2 billion yuan ($188 million) in its Shanghai plant to upgrade equipment as the factory gets closer to exhausting its current capacity, according to people familiar with the matter.
Tesla broke ground in January 2019 on the plant and it is expected to reach production capacity this year, the people said, asking not to be identified as the details are confidential. The electric vehicle pioneer, headed by Elon Musk, said in its 2020 annual report that the installed annual production capacity of the factory is 450,000 vehicles.
A document on the Shanghai government’s platform for companies’ environmental information disclosures showed Tesla plans to invest in optimizing production lines at what was its first factory outside of the U.S.
The upgrade will take place within the plant’s current production area, and the technology will remain compatible with existing nameplates — the Model 3 sedan and Model Y sports utility vehicle — according to the document.
A representative for Tesla in China said the investment is targeted at upgrading key equipment and improving technology, and doesn’t “directly” involve the expansion of production capacity.
Tesla shipped around 350,000 vehicles from its Shanghai facility through the first 10 months of this year, data compiled by China’s Passenger Car Association show. That’s despite Model Y deliveries only starting in January, and as the pandemic and a global chip shortage kept pressure on production. The monthly shipment rate exceeded 50,000 units in September and October, paving the way for the company to hit the annual production capacity level.
Tesla will hire an additional 4,000 production staff as part of the upgrade plan, taking total employees at the factory — which also exports cars to Europe and Asia Pacific — to about 19,000, the government document showed. That, coupled with the production-line upgrade, may increase the plant’s output by at least 10 percent, depending on how the upgrade fares, one of the people said.
Workers in the facility are already working three shifts, 24 hours a day, with only a single day of maintenance every week or two, the person said.
China is key to Tesla’s global ambitions, with the country home to the world’s biggest market for EVs and a raft of suppliers and manufacturers. While the company became the first automaker to wholly own its operations there, Tesla has seen ups and downs, with a highly visible protest at this year’s Shanghai Auto Show alleging issues with its cars’ brakes igniting a wider backlash in China. Sales have stabilized and increased since then, with exports strong in the first half of the year.
