Tesla has emerged as an iconoclast leader in the world of automobile, proving its worth as the ‘most valuable automobile company’ in the world. However, a lot of this achievement comes from the company’s successful expansion into China, which according to a new SEC filing, accounted for almost a quarter of the total business conducted this quarter.
Out of the $6 billion that Tesla reeled in this quarter, China accounted for a massive $1.4 billion, making up for 23.3% of the company’s total quarterly revenue. Compared to the 11% contribution that China had same time last year, this is a massive jump and a testament to the success of the gigafactory in Shanghai.
Moreover, the rising contribution from China was also supplemented by the declining contribution from the home market, US. Coronavirus has emerged as an impediment to the company getting back to work, as Tesla found its largest facility-the Fremont gigafactory, shut down for a large part of the quarter due to the second wave of the pandemic.
While all this was happening at the company’s home turf, business in China bloomed due to people finally getting back to work. The factory played a crucial role in the better-than-expected 90,650 deliveries reported in Q2. The company has big plans for this facility, and hopes to ramp the production to produce 150,000 vehicles by the end of this year.
For the six months that ended on June 30,2020, China accounted for $2.3 billion of the total $12.021 billion that the company made, which makes up for a rather impressive 19.1% chunk. This is also an ode to the fact that China’s rising contribution was not just due to one quarter, and business in the country is in fact, proliferating.
Thus, the company’s decision to open a facility in Shanghai has panned out pretty well. However, there is a catch. Now that Tesla is getting settled in, the time is approaching for it to pay up. Starting from the end of the year 2023, the company will have to pay 2.23 billion yuan ($320 million) in tax to China every year, as part of its 50 year lease agreement. Moreover, it is required to invest 14.08 billion yuan($2.01 billion) as capital expenditure in the facility, which is a huge commitment).
However, the growing presence in the country has filled Tesla with hope, which has already started booking of its Cybertruck in China.