Tesla Model 3, Model Y to be sourced from China?

Tesla’s most affordable and popular car could soon be sourced from China.

A Bloomberg report referencing unnamed “people familiar with the matter” states that as well as supplying the Chinese market with Model 3s, the new Giga Shanghai plant would begin sending cars to Australia, New Zealand, Singapore and Europe.

UPDATE: Tesla Model Y Australia: Everything we know ahead of the electric SUV’s launch

If true – EV Central has contacted Tesla Australia for comment – it would be the first time Teslas sold in Australia have been sourced anywhere but the United States.

Currently the Tesla Model 3 is sourced from the United States, which also supplies the Model S and X.

As well as proximity to Australia, shifting production of right-hand drive vehicles from America would reduce complexity in the main Tesla plant in Fremont, California, which currently builds the Models S, X, 3 and upcoming Y SUV.

It’s not unusual for car makers with multiple factories building the same car to group certain model variants or configurations – such as right-hand drive – in one factory.

If China does start supplying the Model 3 to some countries such as Australia it would also make sense to source the Model Y from the same factory; the Tesla Model Y uses the same underpinnings as the Model 3 but with a higher-riding SUV body on top.

BMW, Mercedes-Benz, Audi, Jaguar and Land Rover all build cars in China, although none are currently sold in Australia.

Volvo is one brand that has begun importing some Australian-delivered cars from China – including the XC60 – with plans to source most of its Australian models from China by 2021 (the XC40 Recharge models, including a PHEV and all-electric car will be sourced from Belgium).

However, while all traditional car brands have joint ventures with Chinese car makers, Tesla’s US$2 billion ($2.8 billion) Giga Shanghai facility is the first standalone factory for a foreign car maker.

Sourcing cars from China will no doubt raise questions about quality, given quality issues with some early Chinese cars.

Initial reports suggested the Tesla Shanghai plant – which opened late in 2019 – was producing higher quality vehicles than the main American factory. However, these were typically anecdotal reports or an apples-v-oranges comparison, with no equivalent data between the two countries.

More relevant is Tesla’s notoriously patchy quality and a 2020 JD Power Initial Quality Survey that found Teslas averaged 250 problems per 100 vehicles, the worst of all brands evaluated and 51 percent higher than the industry average of 166.

There’s also the issue of whether Teslas sourced from China would be any cheaper than those from the US.

On current exchange rates the Model 3 is fractionally cheaper in America than it is in China. The US$37,990 ($52,200) asking price for the base Model 3 is about 4 percent less than the same car sold in China for 271,500 yuan ($54,600).

In Australia the Model 3 is priced from about $79,000 to $108,000 drive-away, depending on what state or territory you live in. The “Full Self-Driving” function adds about $13,000. Keep in mind those prices include GST, local stamp duties and luxury car tax on more expensive versions.

Tesla is also currently building a plant on the outskirts of Berlin in Germany, which is ultimately expected to supply cars to many European countries from mid-2021.

It would seem to make sense to eventually switch Model 3 supply to that new German plant. Perhaps the right-hand drive UK market could source cars from China if it were to focus on RHD production for countries such as Australia.