Rumour has been circulating that Tesla is behind the vast land deal in China. Around 100 acres of land just beside Tesla’s Gigafactory Shanghai.
Tesla’s Gigafactory Shanghai has been expanding at a fast rate, says Fred Lambert of electrek. Needing more space for buildings as the current land area has been filled up, justifying the vast land deal.
After finishing the first phase of the Gigafactory in 2019, Tesla immediately started production of cars in 2020. Its production has been ramping up, that made the company contribute more than 140,000 cars to Tesla’s total production.
Production at Tesla’s Gigafactory Shanghai
However, Now reports from China said that Tesla is behind in its deal of the 113 acres of land next to its factory. Reports from Global Times says that a vast amount of land has been transferred for the expansion of Tesla’s Gigafactory. A total land of 461,142 square meters located within the industrial zone. Report says that the rights of the vast land was transferred at a price of 14,925 yuan per square meter. Documents regarding the rights did not indicate Tesla’s name. However, rumor’s are circulating that Tesla is behind the deal.
Rights granted to Tesla
The buildings being constructed on the site are all owned by Tesla, however, the company doesn’t own the land. Yet, the automaker will get to enjoy the land as it has been granted the rights to use it. The initial term of the rights given is 50 years.
In its recent letter filed to SEC, the company stated that it has been granted an operating lease agreement for an initial term of 50 years. This arrangement has been made together with the local government of Shanghai. Where Tesla is granted the rights to use the land where the buildings of its Gigafactory Shanghai were built.
Part of the terms arranged is that Tesla is required to spend RMB 14.08 Billion in capital expenses. This will generate around RMB 2.23 Billion of tax revenues annually which is projected to start by the end of 2023. Failing to meet the agreement will result in reverting back the land to the local government while payment for the remaining value of the land lease, buildings and fixtures will continue.
Tesla is quite confident that it is able to fulfil this requirement. It believes that even if the volume of actual production will be much lower than the target, the company can still comply with the requirement.
The company is expecting the adjacent land to be included in the deal. As it plans to continue its expansion for the electric car factory which is likely to be designed and produced in China. Tesla revealed its plan to expand Gigafactory Shanghai’s current production of 250,000 vehicles per year to about 450,000 vehicles.
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