Can Tesla Handle the Mass Market?

To hit one million cars by 2020, Tesla is going to need at least one more manufacturing plant. The question is: Where will this plant be, and how is the monster EV manufacturer going to do it? The answer is to think globally.

In a recent Ted Talk, Telsa corporation head Elon Musk said: “we need to address global demand.” Based on this recent commentary, it should be no surprise that Tesla is in talks with a Chinese manufacturing partner about producing Tesla vehicles in China. A partnership with a Chinese car manufacturer would help Tesla avoid the 25% import tax as well as reduce shipping costs and time.

But why China? The Chinese EV market is the world’s largest and is growing faster than any other region. In fact, in 2016, the Chinese market grew by 85% and finished up 351,000 total EV sales. Tesla saw a tripling of revenue in China to $1 billion in 2016.

Let that set in for a second, consider that Tesla saw $1 billion in Chinese sales. Can you imagine what they’d do if Tesla vehicles were 25% cheaper!? Cha-ching! Plus, Tesla would likely make modifications for the local China market, making their desirability even higher for potential Tesla owners and enthusiasts. How will those changes look? I guess that the Tesla Model S and X could look like laughably, over-sized American cars that only rich people have. But, I’ve never been there so I could be wrong…

Besides the tax and logistic benefits of setting-up shop in China, Tesla also must consider adding more plants in the US – an effort that will take at least two years to get going. However, there are cost-effective options here in the US for Tesla. For example, the Tesla Fremont plant was an absolute steal at $42M, roughly $8/sqft - and is quite large when compared to other US manufacturers.

Lastly, when considering bringing Tesla manufacturer to China is the government. Will the US government try to penalize Tesla for moving manufacturing overseas? Or, perhaps Tesla will be offered better incentives to build in the USA.

My best guess is Tesla will need to invest both locally and globally. What’s yours? Should Tesla keep all their manufacturing in the US, abroad or both? And, where specifically should they set up shop? Leave your opinion in the comments below.

I compiled my data using the following sources: