Tesla Shanghai China Factory Confirmed … With A Twist

Jon Howard
October 24, 2017

United States electric carmaker Tesla has struck a deal with the Shanghai Government to build its first factory in China, representing a significant milestone in its attempts to establish a presence in the world's largest electric vehicle market.

Though exact terms of the deal aren't clear yet, Tesla is said to be planning to get the factory deal finalized by the end of the year.

Tesla's production plans in the world's largest auto market are closely followed by industry watchers and investors as China accelerates electric-car development and works on a timeframe to phase out conventional-engine cars. But China has now considered permitting foreign carmakers to establish wholly-owned plants in free-trade zones as part to encourage more production of electric and hybrid vehicles, which the government calls "new energy vehicles" to meet the sales quotas.

The move will help reduce manufacturing and shipping costs, although Tesla will still be required to pay 25 percent import fees. "As we've said before, we expect to more clearly define our plans for production in China by the end of the year", the report continues.

On Sunday morning the Wall Street Journal reported that Tesla has reached an agreement to open a factory in Shanghai.

Chinese internet company Tencent Holdings Ltd has a five percent stake in Tesla and is seen as a potential ally for Tesla's efforts to enter the Chinese market.

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A wholly owned auto factory in Shanghai would be a first for a US auto manufacturer, WSJ noted.

The new factory could mean lower production costs for Tesla but not likely eliminate China's 25% import tax.

However, the Chinese government reportedly has no incentive to offer the Silicon Valley tech firm and will not provide it preferential treatment, likely because this might be seen as a bargaining chip for other vehicle makers.

The company's well known vehicle models included Tesla Roadster, Tesla Model S, Tesla Model x and Tesla Model 3. Chinese electric auto company BYD, which is backed by Warren Buffett, was the best-selling electric carmaker a year ago and sells seven models in the country.

Shanghai-based Tesla Model S owner Jason Man verified with Teslarati that he was able to charge at the underground Supercharger station on Monday afternoon local time.

If the deal indeed pushes through, then Tesla will retain its independence and technologies while potentially gaining a prominent position in China.

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