
Tesla plans China factory that can make 500,000 vehicles a year - JumpCrisscross
http://www.latimes.com/business/autos/la-fi-hy-tesla-china-20180710-story.html
======
mkhalil
Tesla should be very wary of the very real threat from corporate espionage in
China. Brining a factory to China would allow a bad actor to really get into
enterprise and create even better clones. Tesla wouldn't be able to keep up
financially if Chinese manufactures built cars using Tesla research resources.

side thought: Maybe TESLA turns into a research company that sells its IP to
manufactures instead of actually building cars.

~~~
ricw
I'm doubtful this will happen, based on what we've seen in the car industry in
the past. Foreign car companies have had to build cars via Chinese joint
ventures for decades, and as yet, not a single Chinese car company has seen
any large success outside of China.

~~~
tachyonbeam
AFAIK, Chinese people themselves tend to prefer foreign cars, see them as
higher quality status symbols.

~~~
ryanmercer
Indeed. Some cultures in Asia are very "look at what I have", BMW and Mercedes
do a lot of business over there to their equivalent of middle and upper
classes.

------
JanSolo
Apparently Tesla is the first foreign-owned auto manufacturer that has been
allowed to open a facility without giving a 51% stake to a Chinese owner. I
think it's only electric vehicles which are eligible for this new scheme.

There's a huge demand for non-polluting vehicles in China, so expect other
automakers to begin looking at similar factories in that country.

~~~
castratikron
That's unusual that they were allowed to do that. Does the government have any
stake Tesla's plant? Or just not 51%?

------
pfortuny
They seem to say so each year...

Just from 2016:

[https://mashable.com/2016/06/24/tesla-factory-
china-9-billio...](https://mashable.com/2016/06/24/tesla-factory-
china-9-billion/)

~~~
koreyb
"a person close to the matter told Bloomberg"

------
johnm1019
Excuse my ignorance, can someone explain how they are going to pay for this?
My internet experience in the last months has been mostly articles about how
they would keep enough cash with one factory? Then others about Elon said no
more cash raises, etc... Even if they start turning a profit on their cars,
that isn't going to magically give them the millions (billions?) needed for a
new factory.

~~~
jonknee
By issuing the debt and new shares that Elon swears he's not going to do.

~~~
adventured
You're misconstruing what Musk actually said. He said they're not going to
need to issue / raise in 2018. They're not going to begin building a factory
in China this year and won't need financing for it in the next five or six
months.

Edit: for the anti-Tesla downvoters -

"CEO Elon Musk has said that Tesla wouldn't require new funding in 2018, in
either equity or debt. On a call with investors, in response a question from
Morgan Stanley analyst Adam Jonas, Musk said that when it comes to raising new
money, "I specifically don't want to." "

[http://www.businessinsider.com/elon-musk-on-raising-more-
mon...](http://www.businessinsider.com/elon-musk-on-raising-more-money-
in-2018-tesla-2018-5)

~~~
jonknee
The year doesn't matter, I have full confidence he'll keep saying they don't
need to raise money right up until the day they raise money.

------
tomcam
I can’t wait until they can run a factory in the USA that could make 500,000
vehicles per year!

~~~
mikeash
They’re currently at about 350,000/year, so not too far off.

~~~
jonknee
Using your numbers that would mean increasing their output by over 40% without
a new factory... I'd say that is very much "far off". I mean they had to make
a tent to try and convince Wall Street they can make 5,000 cars in a week.

In reality they make nowhere near 350k cars a year. They built 41k in Q2 which
was their most ever by a long shot. They celebrated the 300,000th shipped
Tesla in Q1 2018...

~~~
mikeyouse
That NUMMI plant used to do ~430,000 vehicles per year so Tesla in theory
_could_ produce that many without expanding to a new facility but the
shortfalls of a plant on the West Coast away from so many suppliers in a very
high cost-of-living area are going to make that a much less attractive
proposition. I wouldn't be surprised if they're in talks for a South Carolina
or Alabama facility to produce their Model 3s and if they reserve the Fremont
facility for their higher-end models.

~~~
cultus
These other factories would have to be completely retooled. It would take a
long time and a lot of money. It's not like changing the die in an injection
mold or something.

~~~
mikeyouse
Yeah -- I meant, they'd have to build a new factory from the ground up,
spending billions of dollars to do so.. not that they could just lease a
Corolla plant or something.

------
ChuckMcM
I wonder what other countries they considered, did they consider Mexico ?
(Ford has plants there) or Brazil? Or perhaps India?

~~~
nopinsight
I believe the primary reasons are that China, together with Hong Kong, is
already one of Tesla's largest markets and it has a great potential for growth
as well.

~~~
throwaway5752
At some point, you have to expect that single party control of a government
that is hostile to clean tech and initiating a trade war with the worlds
largest consumer market for the next 50 years is going to accelerate the
exodus of brains and production from the US, too.

~~~
nothrabannosir
Is China hostile to clean tech? I thought they were one of the biggest driving
forces behind clean energy out there.

They also pollute, a lot, because they produce a lot of energy full stop.
Afaik they do everything and anything, right now.

Burning coal doesn’t make you anti clean energy , it just makes you a
polluter. It’s a bit ironic , but then again: welcome to China :p

~~~
drfuchs
Throwaway5752 is referring not to China, but rather the USA, as having “single
party control of a government that is hostile to clean tech and initiating a
trade war with the worlds largest consumer market for the next 50 years“.

~~~
nothrabannosir
That makes complete sense, and I totally missed it. Sorry, and thanks!

~~~
throwaway5752
No, it's odd to think of the US in those terms and still feels strange. I
understand!

------
JudasGoat
I think Nvidia should be as worried about IP theft as Tesla. I remember from
the Model 3 teardown, the commenter was saying the Tesla logic boards were way
above the quality of the other car manufacturers. He compared them to cell
phone PCBs.

------
ryanmercer
Hopefully for export, otherwise they'll unfortunately mostly be powered by
coal :(

~~~
Retric
China uses more coal and produces more CO2 for electricity, but uses less
total fossil fuels (60.6%) than the US (64.2%).
[https://en.wikipedia.org/wiki/Electricity_sector_in_China](https://en.wikipedia.org/wiki/Electricity_sector_in_China)
VS.
[https://en.wikipedia.org/wiki/Electricity_sector_of_the_Unit...](https://en.wikipedia.org/wiki/Electricity_sector_of_the_United_States)

China has a significantly higher % of it's electricity generated from
renewables than the USA and a much faster adoption curve. So, adding electric
cars is still a very large net gain for the environment over IC cars.

~~~
mikeash
The US is about 1/3rd coal, 1/3rd gas, and the rest carbon neutral (mostly
nuclear). China is about 2/3rds coal, a tiny bit of other burning stuff, and
the rest carbon neutral (mostly hydro).

Looks to me like the US is much better for emissions. Especially since US coal
plants are probably a lot cleaner.

~~~
Retric
China is ~56.4% coal and dropping fast which is a long way from 2/3's. This is
down from 81% in 2007 so having recent numbers is really important.

USA happens to have a lot of natural gas which is better than coal for the
environment but still much worse than solar/wind etc. Further, because they
still use a lot of coal and they use more total fossil fuels it's not as a big
a difference as you might think. Really the important question is what is
going to come online to fuel electric cars, and that mix is vastly better than
oil especially when you include extraction, transportation, and refinement.

PS: China is something like ~58% coal equivalent vs ~47% USA coal equivalent
(assuming natural gas produces 1/2 the carbon of coal.)

~~~
ryanmercer
>China’s energy companies will make up nearly half of the new coal generation
expected to go online in the next decade.

[https://www.nytimes.com/2017/07/01/climate/china-energy-
comp...](https://www.nytimes.com/2017/07/01/climate/china-energy-companies-
coal-plants-climate-change.html)

~~~
Retric
That's not saying what you think it's saying. "Chinese corporations are
building or planning to build more than 700 new coal plants at home _and
around the world_."

Coal is very much on the way out, but it's not quite useless yet. Far more
coal power plants are going to be destroyed in the next 10 years than built.
But, if you are going to build a coal powerplant then paying a Chinese company
can be a good choice.

~~~
ryanmercer
Fact is, they're building more coal plants in the country because they can
more quickly meet energy demands with coal and as of last September the world
was building coal plants faster than they were being closed (and I suspect
China is).

~~~
Retric
"Shanghai Electric Group, one of the country's largest electrical equipment
makers, has announced plans to build coal power plants in Egypt, Pakistan and
Iran with a total capacity of 6,285 megawatts — almost 10 times the 660
megawatts of coal power it has planned in China." So yea china is still
building some coal but not that much looking at actual production presents a
different story.

Electricity production in China (TWh) From coal

    
    
      2014	4,354
      2015	4,115
      2016	3,906

[https://en.m.wikipedia.org/wiki/Electricity_sector_in_China](https://en.m.wikipedia.org/wiki/Electricity_sector_in_China)

------
whatok
Can someone more knowledgeable tell me what good a MOU in China is?

~~~
JumpCrisscross
> _what good a MOU in China is?_

Jack shit.

~~~
pavs
You do realize China is the second largest consumer market in the world? If
MOU were jack shit, people wouldn't be doing business there. Many companies
intentionally share their IP in order to do business in China.

~~~
JumpCrisscross
> _If MOU were jack shit, people wouldn 't be doing business there_

It’s a great place to do business. Their MoUs and LOIs are worth jack shit.

~~~
pavs
This is not some mom & pop shop, when multibillionaire companies sign billions
of dollars of MOU, it has to be worth something.

You could argue MOU is jack shit in general, but saying MOU is jack in China
but China is great to do business with does not a computer, considering some
of the largest companies in the world are signing MOUs and going ahead with
their project just fine.

~~~
JumpCrisscross
> _You could argue MOU is jack shit in general_

MOUs from non-mainland companies may get you financing. MOUs from mainland
Chinese companies will not. They have a high rate of falling through, and are
most properly treated as prettified e-mails. Different commercial cultures.

------
microdrum
No faster way to kill your company than to do business with China.

~~~
mywittyname
Just look at the dead husks left by Apple, BMW, and Cisco!

~~~
microdrum
With the exception of Apple, you do not have a great point.

------
billysielu
Unfortunately, our website is currently unavailable in most European
countries. We are engaged on the issue and committed to looking at options
that support our full range of digital offerings to the EU market. We continue
to identify technical compliance solutions that will provide all readers with
our award-winning journalism.

~~~
rory096
This seems to be an issue with all tronc (née Tribune) papers:
[https://news.ycombinator.com/item?id=17480636](https://news.ycombinator.com/item?id=17480636)

------
antris
This article is blocked to the EU.

~~~
seanmcdirmid
Because the LA times, being a local newspaper, doesn’t want to bother with EU
laws.

------
11011011011
Great idea! Take billions in US taxpayer subsidies, then give away all of your
technology to our biggest geopolitical and economic competitor. All because
mass manufacturing is "boring" and "hell" and you can't keep up with demand.

------
api
There's a story behind the story re: Tesla's scaling difficulties. America has
lost its manufacturing base and with it the skill set to build large scale
manufacturing easily. Tesla is going to China because that's where the
expertise is.

~~~
stcredzero
_America has lost its manufacturing base and with it the skill set to build
large scale manufacturing easily._

There's a reason why the NUMMI factories failed in the first place. The
Hawthorne factories were located in the wrong place. The region's culture and
human capital couldn't support the best efforts and know how of Toyota. It
worked in Brazil, however.

[https://en.wikipedia.org/wiki/NUMMI#Makeover](https://en.wikipedia.org/wiki/NUMMI#Makeover)

~~~
mywittyname
I love this excerpt from your link:

> the need Toyota had to start building cars in the United States, a
> requirement due to the possibility of import restrictions by the U.S.
> Congress.

So much irony.

~~~
stcredzero
Irony for whom? I think free trade should be the norm.

~~~
mywittyname
Irony in the sense that this entire thread is dedicated to complaints about
Chinese protectionism in the automotive sector through forced joint ventures,
IP-sharing, and import tariffs when the NUMMI plant was built specifically as
a joint venture between American and Japanese manufactures to share production
techniques with American companies and skirt or head-off import tariffs.

~~~
stcredzero
I see. Quite astute.

