Article source: http://cleantechnica.com/2014/04/24/tesla-factory-china-within-3-4-years/

Picture source: http://www.manufacturing.net/news/2014/09/tesla-plant-decision-sparks-criticism

Elon Musk, the CEO of Tesla, raised the idea of building a factory in China within the next 3 to 4 years. Tesla currently has only one factory, which in the future when the demand rises, the production may not be able to meet the demand. Therefore, setting up a new factory is a way to solve the potential problem.

However, in my opinion, Tesla planning to build a new factory in China has more purposes. Firstly, the article mentions that “because of a hefty 25% import tariff, the Model S still starts at over $121,000 for the 60 kWh model”. By bringing the production into China will reduce the price to under $100,000. This will make the Model S much more competitive in China than its competitors’ products. As China is a huge market with an increasing trend of demand in automobiles, Tesla may be able to gain a great percentage of market share.

Secondly, Tesla’s current factory is located in California, where the average labor cost is high. Unlike the USA, China has a relatively low labor cost. Hence, building up the factory in China will reduce the unit cost per car produced. According to my previous SWOT Analysis Assignment on Tesla, one of its major weakness is the high price of Model S, which the high labor cost is one of the main causes. This future plan is able to solve this problem, making its product more competitive among the global market.