American electronic automaker Tesla (TSLA)’s ambitious Gigafactory project in China is expected to start producing its first Model 3s this month. However, there is still some uncertainty about the factory’s ability to meet its production targets at the end of the year.
Could Tesla live up to expectations?
While making promises and delivering on them on time isn’t exactly Tesla’s style, the Gigafactory is an important project for the company. It could open the gates of the largest auto market in the world and help the company ramp up production. But sources familiar with the matter suggest that Tesla is still not certain about the labor, orders, and supplies.
Note that Tesla targets 1,000 Model 3s to be produced in the Gigafactory in one week by the end of 2019. If it manages to achieve its targets, it would be able to enter the Chinese EV market with a bang and help offset the expensive import tariffs on its cars. Note that all Tesla cars were earlier imported from the US and tariffs ballooned their prices, making them more expensive than local counterparts.
It is imperative for Tesla to start mass production in its Tesla factory as soon as possible. It will help in boosting the company’s total production to 500,000 vehicles by year-end.
A $2 billion dream for Tesla
The new Gigafactory would cost a humongous $2 billion to the EV maker. It is also the first time that the company has started manufacturing its cars overseas. The stakes are almost too high for Tesla to falter, but the progress so far has been good on the regulatory stage. Last month, the company gained adequate approvals to start production at the factory this month, going with the schedule.
A source spoke to Reuters about the company’s plans, saying,
“We aim to start some production in October, but the actual production volume depends on many factors including car orders we received, the performance of newly hired workers, supply chain and so on.”
The source said that the 1,000 to 2,000-unit target may or may not be achieved by the company. Tesla hasn’t officially confirmed the source’s comments yet.
It is important to note that the timing of the Gigafactory launch is crucial since the US and China are in the middle of a trade war. China’s auto market is already going through a weak period, and electronic vehicles experienced low sales for the second month straight in August 2019.