Tesla Gigafactory 3 In China Starts Model 3 Production In November

Morgan Stanley issued positive reviews about construction and supply chain progress at the Tesla Gigafactory 3 in Shanghai, China, saying this mammoth facility will make Tesla Inc. “the leading luxury EV player in China.”

Morgan Stanley sent a team to Shanghai to eyeball actual workings on the ground, including checking-out Tesla’s suppliers. The team reported that because of the rapid construction tempo, Tesla might be able to deliver the first Model 3s from the factory in November 2019 and not in December as widely expected.

It expects Tesla will be able to produce 35,000 to 40,000 electric vehicles (EVs) at Gigafactory 3 in 2020. Production can be boosted to 60,000 EVs by 2021. Morgan Stanley expects Tesla to dominate China’s luxury electric car market over the next five years.

A few weeks ago, Tesla CEO Elon Musk said the company intends to produce 3,000 Model 3s per week by the end of the year. Morgan Stanley, however, took issue with that statement, saying Gigafactory 3 can only attain this level in 2022.

Analyst Adam Jonas, who was part of the team, wrote to investors the construction of Gigafactory 3 is “perfectly on schedule as to last week.” The factory aims to be ready for production by the end of September.

“Our China team’s view of Tesla's ability to ramp domestic production and to take commercial share in the domestic Chinese market is more bullish than the forecast implied within our earnings model,” wrote Jonas.

“We have allowed for a greater level of execution risk in our assumptions, given the complexity of bringing an all new plant with all new workers and many new suppliers on line within the Chinese market.”

Morgan Stanley’s long-term views about Gigafactory 3 are in an altogether different place, however.

“While we anticipate significant pent-up demand for Tesla's locally produced vehicles in the PRC, longer-term we expect the Chinese EV market to remain highly competitive and see Tesla's China volume peaking at 254k units sold in 2024, before falling to the 160k to 170k range by 2030,” according to Jonas.

He also expects China to account for less than 200,000 EV deliveries annually by 2022.