Analysis:Tesla's China expansion hits speed bump amid industry overcapacity

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SHANGHAI : Tesla's ambitious plan to boost auto production in Shanghai, its most valuable plant globally, hinges on China's approvals to develop 70 hectares (172 acres) of former farmland that is currently overgrown with wildflowers.Once courted by Beijing to help spur the development of a domestic electr

SHANGHAI : Tesla's ambitious plan to boost auto production in Shanghai, its most valuable plant globally, hinges on China's approvals to develop 70 hectares of former farmland that is currently overgrown with wildflowers.

Bill Russo, the Shanghai-based founder and CEO of advisory firm Automobility, estimated that China had excess auto production capacity of about 10 million vehicles a year - equivalent to two-thirds of all North American output in 2022. While it was not disclosed in official remarks by Tesla CEO Elon Musk or Chinese authorities, the topic of the expansion came up during his whirlwind visit to China at the end of last month, according to a person with direct knowledge of the matter.

But Tesla's Shanghai plant, which produced almost 711,000 Model 3 and Model Y vehicles last year and has lifted annual maximum capacity to more than 1 million, has been crucial to its cost advantage over its rivals and propelled exports to Southeast Asia and Canada. But as government concerns about oversupply rise and Tesla pushes for its Shanghai expansion, progress by aspiring market entrant Chinese consumer electronics maker Xiaomi to gain a production permit has been slow.

 

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