Tesla's second Gigafactory in Asia is located in a simple way

A few days ago, Tesla's domestic Model Y delivery date was extended again. According to the official website, the delivery time of the Model Y standard endurance model has been delayed by several weeks compared with the previously promised time.

The reason for this adjustment may be that the demand for Model Y in the Chinese market is growing, and the most important thing is that it is not unrelated to the tight production capacity of Tesla's Shanghai factory. In August 2021, Tesla announced that due to the strong demand in the US local market and the consideration of global average cost optimization, Tesla's global export center has been transferred from the Fremont plant in the United States to the Shanghai factory, and the shanghai factory produces cars every quarter, the first half of the production is used for export, and the output in the second half of the season is put into the Chinese market.

In 2021, the total production capacity of Tesla's Shanghai factory is 450,000 vehicles, and the data shows that the cumulative sales of domestic Teslas from January to October of that year are about 368,700 vehicles, which means that the annual production capacity has been used by nearly 82%. Of these, about 150,000 units were exported, accounting for about 40% of the total sales, and the rest of the sales were delivered to the Chinese market, of which the cumulative sales of the Model 3 in the first 10 months were about 112,000 units, while the Model Y was the least, about 106,000 units.

It can be seen that Tesla's expansion of production and construction of a second gigafactory in Asia has become imperative. Although Tesla has not promised that the new production capacity will continue to be located in the Chinese mainland, according to the current automotive industry and Tesla's first gigafactory layout in Shanghai, the second gigafactory in Asia will continue to be located in Chinese mainland will still be a high probability event. Therefore, we try to boldly analyze according to the actual situation of the automotive industry and look for Tesla to be more likely to settle in the city.

As an important industry related to the development of the national economy, the automobile industry involves many industries and personnel, and its scope is wide, which is rarely comparable to other industries. The entire automobile industry in the mainland can basically account for 2% of the total GDP, and all provinces and cities regard the automobile industry as a very important economic growth point in their provinces and cities.

The automobile industry plays such an important role and the characteristics of the automobile industry itself, which determines that the automobile industry has different considerations from other industrial enterprises in the site selection process, and it is precisely because the automobile industry has such an important role and its unique characteristics, so for automobile companies, there are mainly the following considerations when choosing a site.

As the most important consideration for modern enterprises to build factories, resource factors and resources are of greater significance to automobile enterprises. The resources mentioned here mainly refer to land and labor resources.

First, because of the particularity of automobile manufacturing, the automobile manufacturer needs flat and wide land to build the plant and arrange the supporting infrastructure, and because the vehicle company needs to attract downstream parts suppliers to choose to set up a factory near the vehicle factory, it is necessary to have a large area of idle land or low-cost land for its spare parts suppliers to use.

Moreover, this is a direct reduction in the cost of information communication with suppliers for automakers, which improves work efficiency. Therefore, it can be said that land resources have become one of the most important resource factors for oem manufacturers to select sites.

Second, the quantity and quality of labor, especially the availability of high-skilled workers, have become important resource factors for the location and operational efficiency of the automotive industry. From the initial concern only on production costs, to the current advancement of science and technology, more attention is paid to the advanced production factors - the important role of personnel in production and enterprises. For the automotive industry, a highly technology-intensive industry, whether it can obtain a large number of technical personnel reserves is becoming an increasingly important consideration in the process of enterprise site selection.

Transportation factors

The transportation factor here refers to the traffic facilities inside and outside the city or industrial park where the automobile manufacturer is located, including the smoothness of the roads in the city or park, the grade of the road, the road capacity, the construction of traffic facilities, and the convenience of transportation between the area and the external area.

Whether various elements can circulate freely and achieve barrier-free contact and circulation in different directions, which is conducive to maintaining smooth communication between the automobile manufacturing industry and the outside world, raw materials can be delivered on time, and products can be transported to downstream dealers in time after production, which relies on developed and safe transportation networks to complete.

Therefore, places with convenient transportation and strong traffic capacity often become the focus of location selection in the automotive industry, and these convenient places with convenient transportation are supported by developed transportation logistics and communication network technology, so as to ensure the contact and exchange of raw materials and components and products.

Local economic factors

The economic strength of a region is often the guarantee of the future development of the region, because the automobile industry is a capital-intensive industry, the economic situation of the selected region is very backward, it is bound to cause the sustainability of the development of the region, the economically backward areas often can not provide good supporting facilities or infrastructure for the development of the automobile industry, which is why the existing automobile companies often choose to be in relatively developed cities.

Market factors

Relatively speaking, proximity to the market, especially the market with great potential, can save a lot of transportation costs. As an industry with high logistics costs, the automobile industry regards the size of the market as a very important factor. The most direct and effective way to reduce transportation costs is to select automobile manufacturing factories near the area with a large market size, so that they can be closer to consumers, and at the same time, they can understand market information and demand changes in a timely manner, and they can obtain economic agglomeration effects. Generally speaking, indicators such as local GDP per capita and total retail sales of consumer goods are effective tools to measure the size of the market in this region.

Agglomeration factors

The large-scale production of automobiles initially began with the specialized division of labor, the automobile industry cluster from the beginning is through the professional division of labor of the automobile assembly enterprises and the aggregation of various spare parts and accessories manufacturers and formed, with the continuous development and growth of the automobile industry cluster, the scale of production of enterprises in the cluster continues to expand, more and more enterprises can be attracted, which provides objective needs and realistic conditions for the improvement of the degree of specialization between enterprises, and provides the most basic support for the formation of industrial agglomeration competitive advantage. The more obvious the effect of this agglomeration, the more significant the cost advantage of the unit product, and the greater the profitability of the enterprise.

Political tax factors

From a macro point of view, the relevant policies formulated by the state for the automobile industry will deepen the pattern of the automobile industry and provide a support platform for industrial development;

From the perspective of the region, each region will in accordance with the guidance of the relevant national industrial policies, through the formulation of plans in line with the development of the region to provide the survival and development of the automotive industry support policies and the corresponding preferential policies such as taxes, whether you can find the most favorable area for the enterprise from the economic point of view, enjoy as much preferential policies and tax support as possible, is an important consideration for automobile enterprises.

From the perspective of the enterprise itself, the enterprise must conduct a reasonable location assessment and selection on the basis of fully interpreting the country's industrial policy to avoid unnecessary investment risks.

To sum up, the logic of Tesla's second factory location is about three points,

First, the automobile industry in the area where the site is located should be developed, an automobile industry cluster has been formed, the supply chain supporting advantages are obvious, and there is a force to promote 100% localization of parts and components;

Second, it is close to the port, which is convenient for domestic models to be exported overseas, especially in the European and North American markets;

Third, local government policy support and services are relatively strong, and the conditions for setting up factories in Shanghai Lingang factories should be similar in land, credit funds, government approvals and other related fields.

It is hoped that the project can be landed as soon as possible, and together with BYD, "Wei Xiaoli" and many other car companies to consolidate the leading position of new energy vehicle manufacturing in the mainland, and completely realize the curve overtaking of the automotive industry.

Author: Tian Hao, Distinguished Partner of Peking University