Tesla’s latest factory is about to produce a new electric car

Giga Shanghai, Tesla’s first electric car-producing factory outside of the United States, looks set to produce a new electric vehicle.

Reuters reported Thursday that the company had applied for permission from Chinese regulators to start producing a new version of the Tesla Model 3. The new version would have a longer driving range, but would feature rear wheel drive rather than the all wheel drive found on more expensive vehicles. The plans were also spotted on the Ministry of Industry and Information Technology website.

It’s a key step forward in CEO Elon Musk’s plan to start producing entry-level Tesla vehicles on every continent. Musk explained in a February interview that expanding production was vital to ensure vehicles are produced close to the customer. The plan is intended to reduce complexity at Tesla’s California facilities.

The Chinese market in particular is crucial to Tesla’s expansion plans. Around half the world’s electric cars are made in China, and Musk suggested the country is the biggest market for electric cars. But Tesla had struggled to make inroads, thanks to tariffs on imported cars, a lack of access to subsidies, and a shipping route from California that could result in damaged cars.

“I’m not sure if you realize just how much of an uphill battle Tesla has had to sell cars in China,” Musk said during a February interview on Third Row podcast.

Giga Shanghai is built on a 210-acre site in Lingang, a district in the south east of the city. When the company secured a land transfer agreement for the site in October 2018, it declared its intention to ultimately produce 500,000 entry-level Model 3 sedans and Model Y compact SUVs per year. While the Model 3 first entered production in July 2017, the Model Y is not set to hit the road until next month.

The first Shanghai-made vehicles were handed over to consumers at a ceremony in January. The first vehicles are rear-wheel drive models offering over 240 miles of range, retailing for just over 300,000 RMB ($43,000). The cars distinguish themselves from the American-made models as they feature a translation of Tesla’s name as “特斯拉” on the rear.

It’s unclear how much range the new vehicle will offer, but Tesla’s American facilities already produce Model 3s with more range. The long-range all-wheel-drive model offers over 320 miles of range, a marked improvement over the cheaper model but notably less than the nearly 400 miles offered by the larger Model S sedan. A long-range rear-wheel-drive model was discontinued in the second quarter of 2019.

Tesla’s China expansion is unlikely to stop with the Shanghai facility. At the handover ceremony in January, Musk said the company wants to open a design and engineering center in China to design a car for global consumption.

“I think China has some of the best art in the world and I think it’s something that would be appreciated on a worldwide basis,” Musk said. "I think it should be done, and we’re going to do it.”