Tesla Model 3s Can Earn Subsidies In China

Tesla Inc TSLA traded up 1.8% Friday on reports that Model 3s produced at its Shanghai plant would qualify for Chinese subsidies.

China’s Ministry of Industry and Information Technology included two versions of the sedan on a list of vehicles qualified for a 25,000 yuan, or $3,550, subsidy.

Why It’s Important For Tesla

The subsidy cuts the cost of Tesla’s pricy Model 3 — but not by much. In China, the car starts at $50,000.

Still, it closes the gap between Tesla and Chinese rival Nio Inc - ADR NIO. The electric vehicle makers are competing with BMW Group, which last week announced plans to construct its won EV plant, to claim space in the world’s largest electric car market.

After falling 6% Thursday, Nio’s stock traded up marginally Friday morning despite the positive development for its top competitor.

What’s Next For Tesla

Shanghai’s Gigafactory 3 is Tesla’s first international plant, and it’s a proving ground for local sourcing. Management began trial production before the end of October after having broken ground in January. The facility’s performance will testify to Tesla’s capacity to generate profits through factories abroad.

Tesla will begin delivery in China in January.

Tesla's stock traded around $334.57 per share at time of publication.

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