A view of the construction site of the Tesla Gigafactory 3 in Shanghai Photo: Yang Hui/GT

Despite the COVID-19 epidemic that hit the auto industry hard in China, manufacturing at Tesla's Shanghai Gigafactory is proceeding as usual and the second phase construction at the plant is currently underway and estimated to finish next year as planned, media reported on Friday.

"The Shanghai plant is operating at a normal pace with a capacity of 3,000 units a week. The second phase of Tesla's Shanghai Gigafactory, which will be mainly used to produce the Model Y, is under construction. The domestically produced Model Y is expected to hit the market next year," said Tesla's China Vice President Tao Lin on Friday, according to media reports.

Tao also said that cooperation with automotive battery maker CATL is progressing normally at present, but added that "in terms of batteries, Tesla may have other options or other suppliers. But everything in the car will meet Tesla's standards."

Tesla CEO Elon Musk said in an earnings call on Wednesday that the "most exciting" day in Tesla's history will happen on what it is calling Battery Day in mid-May.

A Shanghai-based industry insider surnamed Zhang told the Global Times that notes from Tesla's executives hinted that the company will produce its own battery cells.

Meanwhile, another made-in-China Tesla, the standard-range-plus Model 3 received a price cut on Friday, dropping from 323,800 yuan ($45,754) to 291,800 yuan before subsidies, according to Tesla's account on China's Twitter-like Sina Weibo.

"Tesla hopes that the updated Model 3 will meet China's subsidy policy for new energy vehicles (NEV). We hope with the price cut consumers can enjoy subsidies for NEVs," said Tao, in line with Musk's Wednesday remark that he is confident the vehicle will deliver a gross margin despite the reduction in price.

According to China's newly released subsidy policy, NEVs priced under 300,000 yuan will enjoy a subsidy.

Furthermore, Shenzhen, a city in South China's Guangdong Province that boasted the highest GDP per capita in China in 2019, plans to ease individual application requirements for NEV license plates and to offer a subsidy of up to 20,000 yuan starting on Friday.