Shanghai strives to build global industrial cluster of new energy vehicle companies

Working for a boss as aspiring as Tesla Inc CEO Elon Musk could be one of the most difficult jobs one could ask for, as high turnover at the top at the electric carmaker is no secret.

He has been happy with the China team's work though, in particular at the company's Shanghai factory, the first outside the United States, describing it as a "template for future growth".

This is not surprising. The $2 billion plant broke ground in January and started trial production in October, and Tesla said it was around 65 percent less expensive to build than an equivalent facility in the US.

Tao Lin, vice-president of Tesla, said the company had made a great choice to build the plant in Shanghai.

"Thanks to the outstanding business environment in Shanghai, many of our innovative ideas have become a reality," Tao told reporters in early November.

Tesla is not the only representative of its industry that has been attracted to the city, which is stepping up its efforts to build a world-class industrial cluster of new energy vehicle companies based on its traditional advantages in the automotive industry.

At a promotional meeting in September in Lingang area of Shanghai FTZ (free trade zone), where Tesla's plant is located, agreements for 24 vehicle-related projects with a combined investment of 8 billion yuan ($1.1 billion) were signed, covering manufacturing, applications and service, according to the China News Service.

Zhu Zhisong, a senior official at the area, said the authorities would roll out more competitive policies and favorable financial rules to attract companies that specialize in smart and clean-energy vehicles.

Last year, Lingang's output in terms of vehicles and components totaled 38 billion yuan, said Zhu.

Shanghai's Jiading district, where China's largest carmaker SAIC is based, is equally ambitious.

In a guideline released in April, the district expects to have more than 50,000 automotive engineers and over 50,000 IT professionals by 2035 as vehicles feature more software, according to Xinhua News Agency.

Jiading has been a powerhouse of Shanghai's auto industry, with one highlight being the SAIC Volkswagen joint venture which was established in 1984.

In late November, the Sino-German joint venture launched preproduction of electric models at a new plant in the district.

The factory, with an annual capacity of 300,000 vehicles, is the first designed and built in China for Volkswagen's electric car-only platform, and production is expected to start next year.

Pre-production began just a few days after Volkswagen started manufacturing its first model on the platform in Zwickau, Germany.

Stephan Woellenstein, CEO of Volkswagen Group China, said: "It took only 12 months to see the completion of this innovative factory. We will speed up our new energy vehicle offensive even more, as we expect further e-mobility market growth."

By 2025 the plant will produce up to 15 models on the platform.

"Fully intelligent and digitized, the plant sets a new benchmark for green and smart factories for Volkswagen Group China and the whole Chinese auto industry," Volkswagen said in a statement.

GM has been speeding up its effort in terms of new energy vehicles. Its Chevrolet unveiled the first electric car for the Chinese market in November, which will be produced at its joint venture SAICGM.

GM has established a battery lab in Shanghai's Pudong new area with fully fledged research and development capability and expertise to design, validate and test batteries.

The largest carmaker in the US has localized battery pack assembly at SAIC-GM's battery assembly plant in the city since 2018.

"The facility has adopted a series of world-leading battery assembly processes to ensure the safety, reliability and durability of the batteries powering our electric vehicles built and sold in China," said GM in a statement.