Tesla to build new EV factory in Shanghai

Electric car manufacturer Tesla Inc. reached an agreement with the Government of Shanghai to build a new manufacturing facility for electric vehicles in the city’s free trade zone, becoming the first foreign automaker to start its fully owned car production line in the country.

The news was first reported by the Wall Street Journal which revealed that talks between Tesla and Shanghai officials had been taking place since last June.

If the endeavour takes place, it will be the first time that a foreign automaker will fully own a factory without partnering with a local manufacturer.

The move will help reduce manufacturing and shipping costs, although Tesla will still be required to pay 25 percent import fees.

Nonetheless, it would still give Tesla access to China’s auto-parts supply network at lower costs, boosting sales and helping it compete with the country’s dominant EV manufacturer, BYD Co.

The fundamental principle of China’s auto industry policy since the 1990s requires foreign automakers to have joint ventures with local companies for domestic production.

As reported by Bloomberg last September, the EV leading country is considering revising this policy allowing carmakers to establish wholly-owned electric-vehicle businesses in its free-trade zones.

Should this happen, Tesla will have the opportunity to consider a wide range of options to cease the EV-thirsty Chinese market.

Tesla said in a statement via WeChat: “We expect to more clearly define our plans for production in China by the end of the year”.

“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 U.S., we do need to establish local factories to ensure affordability for the markets they serve”.

China has set ambitious aspirations to accelerate significantly the electric-car sector, aiming to reach a 10-fold increase in sales of plug-in hybrids and fully electric cars.