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Elon Musk on big plans for China



China's Ministry of Business expects annual "new energy vehicle" production to increase to 2 million by 2020, and sales of 7 million new energy vehicles in China by 2025, representing about 20 percent of the total car market there. [19659002] Tesla faces severe competition from domestic Chinese companies such as: Warren Buffet-backed BYD; SAIC, which makes Roewe electric cars; and Geely, the parent company of Volvo. It also faces competition from foreign automakers who produce electric cars or hybrid and already know the way around production in China, such as Ford, Hyundai and Toyota.

Here are some of Tesla's largest plans for China that execs outlined Wednesday's fourth quarter earnings call, transcribed by FactSet:

Shanghai Gigafactory Financing:

"The purchase of the land is a 50- annual lease with China's government So it is not capex, but it is operational lease and it arises as cash flow from operations but the capex we are going to invest is our equipment and we own it fully so it will emerge as capex "The plan, as we have stated in the letter, is still receiving funding for the majority of capital expenditures from local cinema banks. And we expect very attractive rates based on the dialogue we have had and there is a lot of interest." ̵

1; Deepak Ahuja

" Yes, I mean, like a ballpark figure, probably about $ 500 million in capex to get to the 3000 vehicle in Shanghai, ballpark figure. And as Deepak said it was a very competitive deal ltd financing in China, and it was extremely compelling interest rates, and we do not expect it to be a capital drain on the company. "- Elon Musk

Tesla's benefits in China:

" If you are in the automotive industry, you understand how important this is, but perhaps it is not so clear to everyone. Tesla has the first wholly-owned production facility in China by any car company. So this is in-depth. And we are very grateful to the Chinese government for doing so. I think it is symbolic for those who want to open the market and seek and it farewell to everyone. I just want to say like an order with gratitude for the Chinese government to let us do it. It's a very important thing. "- Elon Musk

About batteries in Shanghai:

" We must make the module and package. So it's really just the production of cell supplies. And you can basically use some high energy density, 2170 chemistry. We expect it to be a combination of cells produced by Gigafactory in Nevada, cells produced in Japan and cells produced locally in China. And we feel confident that there is enough supply to hit 3000 units a week. – Elon Musk

Delivering a cheaper model 3:

"We need to bring the Shanghai factory online. I think it's the biggest variable to get to 500,000 plus a year. Car is just Very expensive to enter China, we have import taxes, we have transport costs, we have higher labor costs here, and we have never been qualified for any of the EV taxes, by people criticizing Tesla for being so dependent on incentives. We have the least access to incentives that make EV, which is pretty crazy, because there are so many countries that have put the price incentive on the EV incentive that differentially affects Tesla, and in China, which is the largest market for EV, we have Never had any subsidies or tax incentives for cars.

"So it's hard. When a car is made there, it is entitled to it. It sounds like it's going to be reduced in China in the coming years. But really, the bottom line is, we need the Shanghai factory to get the 10,000 prize and make the cars affordable. It is important to appreciate, the demand for model 3 is insanely high. The inhibitor is affordable. It's just that people literally don't have the money to buy the car. It has nothing to do with desire. They just don't have enough money in the bank account. If the car can – if we made it cheaper, the demand is extraordinary. "- Elon Musk

About how demand in China stacks up against Europe:

" Our relationship with Europe and China is actually how do we get the cars made and ordered so that they reach customers before the end of the quarter, and we do not have a large number of cars on the order. It's our biggest challenge. There is no demand. That's how we get the cars there fast enough … I mean, we don't even try, I should point out. Our factory is just now making cars for China and Europe. That's all it does about model 3. And our whole focus is fine, how do we get those cars made, get them on a ship as fast as possible. "- Elon Musk

On US-China Trade Relations:

" We do not know what will happen to trade negotiations. So it is very important to get these cars specifically to China as soon as possible. We hope the trade negotiations are going well, but it is not clear. But we need to get them there while it's kind of a ceasefire on the wage war. And the demand is not really one of the things we think about. "- Elon Musk

WATCH: Elon Musk says the demand for Model 3 is" insanely high ", but the price is too high


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