Tesla Hits China Milestones With Tax Break, First Local Model 3s

(Bloomberg) — Tesla Inc. secured a tax break in China just days before the delivery of its first locally built cars, marking a major milestone for Elon Musk’s company as it pushes to expand in the world’s largest electric-vehicle market.

The China-built Model 3 was included Friday on a list of vehicles qualifying for an exemption from a 10% purchase tax in the country. The first 15 units of Model 3 sedans assembled at Tesla’s new multi-billion-dollar Shanghai plant — its first outside the U.S. — will be delivered to company employees Dec. 30, a Tesla representative said by phone.

The shares gained 0.2% to $431.90 in New York at 9:37 a.m. local time. The stock has surged since the carmaker reported a surprise profit Oct. 23 and is now more than double its year low of $178.93 in June.

CEO Musk is counting on the China plant to help build on Tesla’s recent momentum in the world’s largest market for electric vehicles (EVs) and autos in general. The Model 3 will compete with electric cars from local contenders such as Nio Inc. and Xpeng Motors, as well as global manufacturers including BMW AG and Daimler AG.

The Shanghai Tesla factory, which broke ground at the start of this year, is a crucial test of Musk’s bid to keep his carmaker profitable as he bets big on China’s appetite for electric cars. The site was originally just a muddy plot about a 90-minute drive from Shanghai’s city center. Musk said he’s never seen a factory built so quickly.

With Tesla’s volatile stock price and strained finances, investors will be watching closely to see how the ramp-up unfolds. The investment will be a deciding factor in determining whether Tesla will be able to take on local competitors and fend off challenges from Mercedes-Benz, BMW and Audi.

The launch will also provide clues to Tesla’s ability to truly go global. The company is planning to follow up with a production facility in Europe, where it is experiencing burgeoning sales growth in several markets.

In October Tesla said the locally built Model 3 will be priced from about $50,000. On top of the tax exemption announced Friday, the China-built model this month qualified for a government subsidy of as much as 25,000 yuan ($3,600) per vehicle.

The company may lower the price of the locally assembled sedans by 20% or more next year as it starts using more local components and reduces costs, according to people familiar with the matter.