Tesla may start making cars in nation by 2020

An employee fits a rear axle to a Tesla Model S automobile on the driving unit assembly line at the Tesla Inc factory in Tilburg, the Netherlands. BLOOMBERG

The billionaire entrepreneur said Tesla is about three years away from starting production in China and will not make any significant capital expenditure until 2019, Bloomberg reported on Thursday.

Musk added that the three-year wait period is a rough estimate. "Don't set your watch by this," he said.

Tesla confirmed in late October to China Daily that it was in talks with the Shanghai city government to build a plant in the region and said its localization efforts would become clearer by the end of 2017.

Musk said the China plant will make cars for China and other parts of Asia, essentially the smaller and cheaper Model 3 sedan and the upcoming Model Y crossover.

It will not make its more expensive Model S sedan or Model X sport utility vehicle in China.

Musk made the remarks on Wednesday during the company's third-quarter earnings conference.

By the end of September, Tesla's accumulated global sales had reached 250,000 cars, and China is fast becoming one of its most important markets.

The company delivered 13,500 cars to China in the first nine months of 2017, more than double from a year earlier, according to statistics from the China Passenger Car Association.

Cui Dongshu, the association's secretary-general, said Tesla's decision to make cars in China is a win-win move as it will not only boost sales but also set a good example in quality for new energy carmakers in the country.

Imported cars in China are subject to a 25 percent import tax and hence a local plant would make Tesla vehicles more affordable.

When localized Tesla cars arrive in China by 2020, the company could face more competition with a host of firms revving up efforts to get a slice of China's new energy car market.

For instance, Chinese startup Nio is to launch its electric SUV next month. Future Mobility Corp, co-founded in 2016 by former BMW and Infiniti executives, will start making a mid-sized electric SUV in 2019, with a sedan to follow in 2021. Both carmakers are targeting the premium car sector.

China is the world's largest new energy car market, with 1 million such cars running on its roads by the end of 2016.

It has set a goal to sell 2 million new energy cars a year by 2020, according to a government blueprint released in April.