Foreign car-makers traditionally partner with local manufacturers, but that will reportedly not be the case with Tesla. Instead, Tesla will own the entire factory. That means Tesla will be able to cut some costs of production and ultimately the sale price of Teslas in China, but it will likely still be responsible for paying China’s 25 percent import tariff.
Rumors of this deal first surfaced in June, when Bloomberg reported Tesla was in talks with Shanghai’s local government to build its cars there for the first time. Tesla later confirmed it was in talks to build a factory in Shanghai.
China has the world’s largest vehicle market and has aggressive targets for electric cars. The Chinese government is aiming to sell seven million electric vehicles a year by 2025. In September, China ordered all car-makers operating in China to start making EVs by 2019.
The timing of the official announcement is unclear. Tesla declined to comment for this story, but pointed to a statement a spokesperson made in June:
Tesla is working with the Shanghai Municipal Government to explore the possibility of establishing a manufacturing facility in the region to serve the Chinese market. As we’ve said before, we expect to more clearly define our plans for production in China by the end of the year. Tesla is deeply committed to the Chinese market, and we continue to evaluate potential manufacturing sites around the globe to serve the local markets. While we expect most of our production to remain in the US, we do need to establish local factories to ensure affordability for the markets they serve.