Tesla has relied on China to maintain its sales momentum, and it appears to be on track with the plan.
In the three months ended June 30, the automaker's sales in China rose 102.9% year-over-year to $ 1.4 billion according to its most recent SEC filing. This means that China now accounts for 23.3% of Tesla's total sales of $ 6 billion in the quarter, compared to just under 11% in the same period last year.
To increase affordability for Chinese consumers, Tesla signed a 50-year lease with the Shanghai government to build a gigafactory that would keep production costs down and allow them to reap local tax benefits and avoid customs duties. Under the terms of the agreement, the electric vehicle giant will have to pay taxes of 2.23 billion yuan ($ 320 million) to China annually from the end of 2023. In addition, investments amounting to 14.08 billion yuan must flow into the plant.
Tesla started shipping The Model 3 made in China was produced at the end of last year and is well on its way to including its Model Y, a mid-size electric SUV, in its production in the largest car market in the world. Earlier this month, the company also made reservations for its futuristic cyber truck in China, which will not go into production until late 2022.
While deliveries in China rose sharply in the second quarter, Tesla delivered 4.8% fewer vehicles overall in the reporting period due to the challenges posed by COVID-19, including the cessation of production. The period was the fourth consecutive quarter of profitability for the automaker.