Tesla Reaches Deal With Shanghai To Build A Car Factory In China

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A huge wildcard with the ambitious plan is how the Shanghai government will treat tariffs for Tesla cars produced in the free-trade zone. Wrote the Verge: "While the U.S. is still Tesla's largest market, China has vast potential thanks to the growing percentage of auto ownership and the country's effort to improve air quality and encourage sales of electric and hybrid vehicles".

However, Beijing has considered allowing foreign automakers to set up wholly-owned factories in free-trade zones, in part to encourage more production of electric and hybrid automobiles. Until now, USA carmakers like GM hoping to sell cars in China's domestic market have been forced to work (and more importantly share profits and technology) with a local partner.

Neither Tesla nor Shanghai officials have yet confirmed report, but the automaker had previously said it was in discussions with the city and that it would have Chinese production plans "clearly defined" by the end of the year.

In a bid to gain traction in China's growing electric vehicle market, Tesla is setting up a manufacturing facility in Shanghai, according to the Wall Street Journal.

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As Ars Technica reports, the deal Tesla has apparently done bypasses the need to partner with a local company.

"We continue to evaluate potential manufacturing sites around the globe to serve the local markets". Instead, Tesla will own the entire factory. It was also encouraging EV makers to build factories by opening free-trade zones.

The Model 3 is the luxury electric vehicle maker's newest auto, and Consumer Reports said it had no data on the vehicle. It's the cornerstone of Tesla's expansion into the (relative) mainstream, and anything it can do to both lower costs and improve availability should make a significant impact on sales. Tesla and the Chinese government, neither of who have made a formal announcement yet, are reported to be working out the finer details of the agreement.

In March, Tesla won an investment worth $1.78 billion from Tencent Holdings, a major internet company with close ties to the Chinese government, to use as funding for its expansion in China.