Tesla has met their goal to achieve 90% localized parts at Giga Shanghai by the end of 2021 a full month earlier than anticipated.
According to Tesla China vice president Grace Tao, the Giga Shanghai localization rate has now exceeded 90%.
A localized supply chain allows Giga Shanghai to produce cars at much lower costs than if parts were imported from around the world.
This translates into increased margins for the automaker and greater profitability on each car sold.
The announcement should come as no surprise. Tesla worked hard since opening the factory in early 2020 to guarantee a robust local supply chain to support production.
Tao also revealed production at Giga Shanghai continues to increase. Initial reports from China’s EV100 think tank indicated Tao has said the factory was on track to reach 500,000 vehicles produced this year.
The report was later clarified by Tesla China as “inaccurate” to Reuters. Instead, the company directed the news agency to its Q3 2021 results, in which it said potential annual production exceeded 450,000.
Using either number, the outlook is extremely positive for Tesla in China.
As of the end of October, Giga Shanghai had produced over 362,000 Model 3 and Model Y cars in 2021. To reach a conservative output of 450,000, the factory would have to pump out around 88,000 more cars in the final two months of the year.
If they are able to achieve that, that extrapolates to a production rate of 528,000 cars per year.
And that is before Tesla spends $188 million to expand Giga Shanghai production capacity. That project is expected to begin this month.