Tesla Granted Permission to Sell its Shanghai-made Model Y Crossover in China

author: FutureCar Staff    

An aerial view of Tesla's Shanghai Gigafactory under construction in 2019. (Source: AFP/Getty Images)

After becoming the world's most valuable car company in 2020 with a market cap topping $400 billion, Tesla is working to expand its manufacturing footprint in China, which is the world's biggest auto market.

The California company was just given the greenlight to sell the Model Y crossover in China. China's Ministry of Industry and Information Technology published the approval on its website on Monday. Tesla applied for permission to sell the Model Y earlier this month. 

The Model Y crossover will be built along with the Model 3 sedan at Tesla's new Shanghai factory, which went online last year after Tesla was added to a government list of approved automotive manufacturers to start Model 3 production in the country.

The Shanghai factory is Tesla's first assembly plant outside of the U.S. Its second overseas factory is currently under construction in Germany. Before the Shanghai plant started building the Model 3, all of Tesla's vehicles were assembled in Fremont, California.   

Tesla's Shanghai factory was completed in less than a year and the first Model 3's built in China were delivered to customers in Dec. 2019. Earlier this month, Tesla said it will export the China-made Model 3 to Europe.

Tesla's Advantage in China

Tesla was the first foregin automaker to wholly own a factory in China after the Chinese government started to relax rules requiring that overseas automakers own no more than a 50% stake of any joint venture with a Chinese vehicle manufacturer.

With its new vehicle factory in China soon producing both the Model Y and Model 3 locally, Tesla has an advantage over its competitors, including BMW, Mercedes Benz and Ford Motor Co. Producing vehicles in China allows Tesla to avoid steep import tariffs. Without the tariffs, Tesla can price its vehicles more competitively and still make a profit.  

In 2018 for example, five of the top 10 vehicles exported from the U.S. and shipped to China were BMW and Mercedes-Benz models built in the U.S. In 2018, BMW exported over $8 billion worth of vehicles from its Spartanburg, South Carolina plant to countries around the world. Many of the vehicles were shipped to China. However the vehicles are still subjected to China's import tariffs since they are built on U.S. soil.

German automaker Mercedes Benz imports the popular GLS and GLE SUVs from its plant in Tuscaloosa, Alabama and U.S. automaker Ford exports its luxury Lincoln MKC crossover and Ford Explorer SUV to China.

BMW currently builds its less expensive X1 SUV in China through a joint venture with Brilliance China Automotive Holdings Ltd. and has plans to increase its ownership stake to 75% by 2022. 

BMW also revealed its new fully-electric iX SUV earlier this month aimed at luring buyers away from Tesla. It will go into production at BMW Plant Dingolfing in the second half of 2021 and it will likely compete with the Tesla Model Y in the China market.

Tesla sold 12,143 China-made Models 3s last month, a 7% increase from September when it sold 11,329 vehicles.

The Tesla Model Y starts at ¥ 488,000 ($74,173) in China for the all-wheel-drive, long battery life version. It has a WLTP range of 313 miles. Tesla's China website shows it's expected to start production in 2021.

Last week, Tesla said it plans to produce electric vehicle chargers in China by next year.

FutureCar Staff