Tesla set to build its first factory in China following government approval

by Harriet Bell October 24, 2017, 0:37
Tesla set to build its first factory in China following government approval

If the Tesla agreement is reached, the EV maker would be the first foreign manufacturer to build vehicles in China without a local manufacturing partner. The WSJ's article cites reports from people who have been briefed on the company's plans to build the plant.

China taxes a 25 percent duty on sales of imported vehicles and has not permitted foreign carmakers to build wholly-owned factories in the country, the world's largest auto market. If the market for electric cars continues to soar, as Chinese officials hope it will, there could be other Tesla factories in China in the future.

Sources tell the newspaper that the agreement will allow Tesla to set up a facility in the city's free trade zone.

A factory in China is particularly important for Tesla as the company ramps up production of its most affordable vehicle yet, the Model 3.

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Tesla reiterated a statement from June that it is working with the Shanghai government to explore local manufacturing.

Tesla expects to have more clarity on its China production plans by the end of the year.

According to the report, this is a "first of its kind" deal in which a foreign vehicle manufacturer has been allowed to own a plant in Shanghai's free trade zone.

However, with this move, the Chinese government is likely signaling it's now open to easing restrictions in a bid to boost manufacturing of electric vehicles but may not be willing to go as far as to reducing or eliminating the 25-percent import tariff that Tesla would be subject to.

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Since entering the Chinese market in 2014, Tesla has rapidly expanded its local operations, with China revenue in 2016 growing to $1.06 billion, a three-fold increase from the previous year.

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

The Wall Street Journal reports that Tesla has signed off on a deal to set up a manufacturing facility in Shanghai, China.

Under current rules, the cars Tesla builds in the free-trade zone would still count as imports and incur the tariff. Details of an announcement about the deal were being finalized. The Chinese government is aiming to sell seven million electric vehicles a year by 2025.

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Local production would make it easier for Tesla to access China's auto-parts supply network and engineering talent pool at lower costs, accelerating sales growth and helping it compete with BYD Co.

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