Amidst the trade war between the U.S. and China, Tesla Inc. (NASDAQ: TSLA) managed to secure a lease for a factory in the outskirts of Shanghai. The Company has signed a deal with the Shanghai government and agreed to pay China USD 323 Million (Yuan 2.23 Billion) a year in taxes for the factory site. Local authorities agree for the company to build the electric-vehicle factory under a few conditions.
Under the terms of the lease, Tesla must start generating annual tax revenue by the end of 2023 or the company would need to hand the land back to the government. Tesla must also spend at least USD 2 Billion (Yuan 14.08 Billion) in capital expenditure on the plant over the next five years. This will be Tesla’s first overseas factory site and it aims to avoid tariffs as well as keeping prices down in the world’s largest electric-vehicle market.
The Company plans to invest several billions of dollars into this facility and will aim to produce half a million cars at this Shanghai location over the next year. The capital expenditure requirement and the tax revenue target will be attainable even if the number of cars produced is far lower than expected. This is a major step for Tesla to be ahead of the game even though the company is already one of the pioneers of the electric-vehicle market.