Musk Says Tesla Could Eventually Build Other Factories in China

(Bloomberg) -- Elon Musk signaled Tesla Inc., which is striving to complete construction of its first car plant in China, could eventually have more production facilities in the country given the market’s scale.

“China is pretty big geographically, so it may make sense to have factories in other parts of China in order to reduce logistics costs,” Musk told investors at Tesla’s annual shareholder meeting in Mountain View, California, on Tuesday. “The faster you scale, the more cash you have.”

China is Tesla’s second-largest market after the U.S., and the company is constructing a gigafactory in Shanghai that will produce batteries as well as cars for the local market as soon as this year. Musk said Tesla’s announced goal to achieve annual production of 500,000 vehicles a year at the plant is an “interim” target, and longer term, capacity could top 1 million vehicles. He didn’t give a timeframe.

Read More: Musk Says $500 Million Enough to Get Shanghai Production Running

Local production in China will speed up deliveries and help the company improve capital efficiency, the CEO said.

Still, Musk indicated any further expansion in China wouldn’t be imminent.

“We can’t spend money too fast, you know, we’ll run out of it,” he said.

Tesla started taking orders for lower-priced Model 3 cars to be made in China last month. Local production in China, the world’s largest auto market, will also allow Tesla to avoid import duties amid trade tensions.

©2019 Bloomberg L.P.