Tesla, China, Both to Benefit From 'Gigafactory' Deal

Tesla has hit a speed bump that will cut subsidies for customers buying its electric vehicles in the U.S., after Elon Musk's carmaker hit a milestone of 200,000 sales. Those have already prompted Tesla to raise its prices for Chinese consumers (more on that below).

"It's like you just took all the highways away from L.A. or something", Musk told Bloomberg, adding that Tesla's workers had to scramble to manually assemble vehicle components.

Electric vehicle producer Tesla Inc. says it will build its first factory outside the United States in Shanghai.

"Tesla is deeply committed to the Chinese market, and we look forward to building even more cars for our customers here", the company said in its emailed statement.

Tesla is the first automaker to reach this milestone, while General Motors has said that it expects to follow sometime later this year.

On Tesla's website, under its electric vehicle incentives page, it shows that as of January 1, the federal tax credit for anyone who purchases a new Model S, X or 3 will be reduced to $3,750 from $7,500. Then it will halve to $3,750 for the first half of 2019 and halve again for the second half.

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Following the change, Tesla buyers will only be eligible to receive the full $7,500 federal tax credit until December 31.

Many states provide their own incentives up to a few thousand dollars; Tesla lists them here. With this in mind, this newest batch of Model 3 filings, provided that the cars do get delivered this third quarter, could definitely help Tesla's profitability goals this Q3 2018.

For example, a buyer today who purchases a Model 3 for $50,000 (representing a long-range battery, rear-wheel drive auto with the required Premium Package), would get a tax credit that will bring the effective price down to $42,500.

The Model 3 is Tesla's first mass-market vehicle, created to broaden the company's customer base beyond the luxury segment and increase the rate of electric vehicle adoption.

The news comes a week after a 'trade war' between the USA and China began, as the US placed a 25% tariff on $34 billion worth of imported Chinese goods. Producing cars in China would eliminate risks from tariffs and other import controls. Putting the factory closer to the market will shorten that process and potentially avoid logistics delays.

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