Tesla Must Pay $323 Million In Taxes To Shanghai Every Year Or It Will Lose Gigafactory Land

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For a company that has already racked up a tab of over $1 billion in losses this year, what’s another $323 million amongst friends? 

This was quite possibly the attitude the company took when agreeing to pay China 2.23 billion yuan – about $323 million – in taxes every single year as part of their deal with local authorities to build their factory on the outside of Shanghai, according to Bloomberg

Tesla has also committed to drop about 14.08 billion yuan – or about $2 billion – in capex on the plant over the next five years, according to its lease. While the point of the Shanghai Gigafactory was to avoid tariffs and keep prices down, we’re not sure how an annual tax requirement of well over a quarter of a billion dollars is going to make things easier for Musk.

But, not unlike many of Musk’s other projects, we’re sure the motive was to get the factory set up for optics as quickly as humanly possible and (literally) at any cost so Tesla has something flashy to show the investment community; it would only worry about the expense side of the ledger much later.

Tesla will likely argue that the requirements are tame compared to their targets in China, where it aims to produce half a million cars at the site over the next 12 months, depending on how quickly output ramps up. 

Tesla said in its 10-Q: “We believe the capital expenditure requirement and the tax revenue target will be attainable even if our actual vehicle production was far lower than the volumes we are forecasting.”

OK. We’ll hold you to that. 


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