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Tesla Looks to Concentrate Supply Chain in China

By Howard Smith - Mar 10, 2020 at 11:00AM

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Document shows plans to increase local production of certain car parts.

A Chinese government document shows that Tesla (TSLA -1.76%) is working to increase production of some parts at its Shanghai factory, according to a Reuters report. 

The electric car maker opened its newest auto production factory in China last year, and it began delivering Model 3 sedans in December 2019. 

auto assembly line

Image source: Getty Images.

Supply chain management

According to the document, Tesla plans to add production capacity for parts such as battery packs, electric motors, and motor controllers. It specifically noted that it aims to increase capacity for pipes used for cooling from 150,000 sets per year to 260,000, though it reportedly did not mention specific volumes for other parts. 

China is the world's largest auto market, and this would allow Tesla to originate more supply locally. At the end of 2019, Tesla said it imported about 70% for parts used in its China plant, but by the end of 2020, it wants to keep its full China supply chain domestic.  

As of the end of December, local media reported the Shanghai factory was producing 1,000 Model 3 cars per week as it ramps up to its annual goal of 150,000, and eventually 250,000 including production of the Model Y.

Recently, Tesla has had to manage disruption caused by the coronavirus outbreak, including an 80% drop in February retail car sales in China, according to China Passenger Car Association data.

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