Tesla Inc. delivered its first China-built cars on Monday, a milestone for Elon Musk’s company as it accelerates a push in the world’s largest electric-vehicle market.

The company handed over the Model 3 sedans assembled at Tesla’s new multi-billion-dollar Shanghai plant — its first outside the U.S. — to company employees in a ceremony at the facility on Monday. A total of 15 vehicles were to be handed over.

Chief Executive Officer Musk is counting on the China plant to help build on recent momentum for the company in the world’s largest market both for EVs and autos in general. The Model 3 will compete with electric cars from local contenders such as NIO Inc. and Xpeng Motors, as well as global manufacturers including BMW AG and Daimler AG.

While China-built cars aren’t yet being delivered to customers outside the company, Monday’s milestone caps several months of wins for Musk. The latest came Friday, when the locally built car was included on a list of vehicles qualifying for an exemption from a 10 per cent purchase tax in China.

The stock has surged since the carmaker reported a surprise profit on Oct. 23, and is now more than double its year low of US$178.93 in June. The shares closed little changed at US$430.38 on Friday.
 

Muddy Plot

The Shanghai Gigafactory broke ground at the start of this year. Originally just a muddy plot about a 90-minute drive away from Shanghai’s city centre, it is now a crucial test of Musk’s bid to keep his carmaker profitable as he bets big on Chinese appetite for electric cars.

With Tesla’s volatile stock price and strained finances, investors will be watching closely how the ramp-up unfolds. The multibillion-dollar investment will be a deciding factor to determine whether Tesla will be able to take on local competitors and fend off challenges by the likes of Mercedes-Benz, BMW and Audi.

Although Musk has said he’s never seen a factory built so quickly, the first delivery came only a day before the end of 2019. Back in April, the CEO predicted Tesla would make at least 1,000 cars a week in Shanghai by the end of the year — a volume the company’s original factory in California spent months trying to hit. He’s also said a weekly rate of 3,000 is a target at some point.

Tesla said in October the locally built Model 3 will be priced from about US$50,000. On top of the tax exemption announced Friday, the China-built model this month qualified for a government subsidy of as much as about 25,000 yuan (US$3,600) per vehicle.

The company may lower the price of the locally assembled sedans by 20 per cent or more next year as it starts using more local components and reduces costs, people familiar with the matter have said.

The launch will also provide clues about Tesla’s ability to truly go global. The company is planning to follow up with a production facility in Germany to tap rising electric-car demand in Europe.