I read two interesting reports recently about the future of the industry with two new factories being proposed: one in Asia and one in Africa with a US company building in Asia and an Asian company building in Africa!
BYD, the Chinese electric car and battery maker has signed a deal to build a factory in Morocco to assemble new vehicles and other equipment. Morocco is growing as a country for vehicle assembly with Renault recently producing their 1 millionth car at a factory that was opened only six years ago. The PSA Group is on schedule to start production at their new factory in the country next year as well.
Morocco is keen to have a fourth assembly plant in their country (Renault has two) and this would help the local economy by bringing new jobs to the local population and with exports, would improve the balance of payments such that the country would be on a better footing.
BYD have been on a global expansion of late. They are building electric buses in Hungary and California and have an agreement with Dennis in the UK to also assemble them there. They have announced plans to invest in manufacturing plants in France and Canada as well.
BYD have an agreement with Daimler to build a vehicle in China and the expectation is that the African factory will expand on that as well as manufacturing batteries for other European companies which will be cheaper than exporting them from China due to a free trade agreement between Morocco and the EU. BYD will employ 2,500 people and have set an aggressive start date for production: next year, although they haven’t said what they will assemble first!
From a Chinese company in Africa to a US company wanting to get into China. Elon Musk has made another announcement – in the cloud of marijuana and hot air that has been coming out of him for several weeks. It was a direct attack on competitors in the region, including BYD. Tesla has signed an agreement with the government in Shanghai to build a factory capable of 500,000 vehicles a year. It comes at a time where a trade war between the US and China has escalated many plans for expansion by American firms. With a tit-for-tat tariff war where US cars have just become more expensive in China, the announcement by Tesla is actually great timing. It would mean Tesla being able to ship cars all around Asia much cheaper than today which would also mean (hopefully) cheaper unit prices.
China is a huge market for electric and hybrid vehicles with over 700,000 units sold last year and with no sign of sales slowing down, it could be a gold mine for Tesla if they can get the factory running at full tilt as quickly as possible – something that the current factory in the US is still unable to do. If they can get the Model 3 built quickly and with high quality in China, it will probably save the company!
It has always been an ambition of Tesla to open a factory in Asia and last year they thought that it would be another few years away, however, with some foresight, financial modelling and uncertainty around the current Administration, it looks like the Board has brought forward plans to expand.
Apparently Tesla will invest about $5B in the plant – some of that money possibly comes from the recent Saudi investment in the company. Last month Tesla opened up a bit more by saying that they want Chinese production to start in 2020 and like BYD, they have global expansion plans with thoughts of a European factory to improve sales in that market.
Leave Motoring Weekly a comment! Your views are very welcome.