Thanks to a new tax break announced earlier this month, Tesla stores in Shanghai have been crowded with customers, as orders continued to flow in for the company’s affordable electric vehicle, the Model 3 sedan built at the city’s newly opened Gigafactory.
Production may be halted, however, as the Chinese government has ordered the shutdown of it and other factories over coronavirus fears, according the breaking media reports.
The Model 3 orders spiked amid a cooling electric vehicle market in China after authorities gave dozens of electric vehicle makers a new tax break which lowers the cost of buying a Tesla in China to less than 300,000 yuan (about US$43,745), China.org.cn reported.
“We have more customers these days looking for test drives and more information,” said a salesperson in a Tesla store in Shanghai.
Tesla’s Shanghai plant has manufactured nearly 1,000 vehicles available for sale and reached a production capacity of more than 3,000 vehicles per week since it rolled out its first 10 Model 3 sedans to Chinese customers on Jan. 7, the report said.
The price makes Tesla a competitive player in China’s new energy vehicle (NEV) market, said Cui Dongshu, secretary general of the China Passenger Car Association, adding that Tesla’s China production will have a “catfish effect” on the country’s auto industry, the report said.
Tesla’s sales in China will help push domestic carmakers to speed up technological upgrading, Cui added.
As a benchmark for NEVs, the Model 3 will help drive the innovation and upgrading of domestic suppliers, according to a report by Minsheng Securities.
China’s NEV sales went up at the end of 2019 after almost a year of slowdown, reaching a 71.4% growth month on month in December, according to the China Association of Automobile Manufacturers, the report said.
Meanwhile, according to The Verge, the Chinese government has ordered the shutdown of Tesla’s new factory in Shanghai over coronavirus fears, which will delay the company’s production of the Model 3 there, executives announced in a call with investors.
The ramp of the Model 3 production will be delayed by a week and a half and the shutdown may “slightly” impact the company’s profitability in the first quarter of 2020, Tesla finance chief Zach Kirkhorn said.
Tesla is one of several companies affected by the Chinese government’s order, which requires facilities to remain shut down until February 9.
According to The Verge, Tesla generated US$24.6 billion in revenue in 2019, buoyed by a fourth quarter revenue figure of just shy of US$7.4 billion. Tesla still didn’t turn an annual profit — in fact, it lost US$862 million in 2019.