Tesla Building Electric Car Factory In China

Tesla Building Electric Car Factory In China

The company said that it is planning to open its own manufacturing facility in Shanghai by end of the year. However, China levies a 25 percent duty on sales of imported vehicles and has not allowed foreign automakers to establish wholly-owned factories in the country.

Such an arrangement could potentially set up Elon Musk's company to be in a strong position to sell their line of vehicles in the largest electric auto market in the world, bar none.

The rumored new factory would be based in the free-trade zone of Shanghai.

Tesla is reportedly making a foray into the world's largest growing market for electric vehicles (EV) with an agreement to set up a factory in China to serve the needs of the local market.

Tesla will however buy many of its spare parts from China, especially if it builds its plant in the Shanghai region.

China has the world's largest vehicle market and has aggressive targets for electric cars.

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One way they can circumvent these restrictions is to team up with a local company, but that would mean they will have to share their technologies and give up profits.

"We continue to evaluate potential manufacturing sites around the globe to serve the local markets".

Tesla is wrestling with production problems at its sole factory, in Fremont, California. "While we expect most of our production to remain in the USA, we do need to establish local factories to ensure affordability for the markets they serve", it said.

However, under current rules, the electric vehicle manufacturer will still be subject to the 25 percent import tariff applied by the country's authorities.

China is Tesla's second biggest market for revenue. The company's recently-launched Model 3 had a disappointing initial quarter due to inability to meet demand, which Tesla blamed on "manufacturing subsystems" taking "longer to activate" than expected. It was also encouraging EV makers to build factories by opening free-trade zones. Previous year in China more than half a million new-energy cars were sold.

More information on Tesla's manufacturing deal with Shanghai should become available in coming months.

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