Tesla Reportedly Close To Operating Its Own Manufacturing Facility In China

A driver uses Tesla's charging station in Xi'an capital of Shaanxi province

The aforementioned "hoops" that foreign carmakers have to jump through refer to the 25 percent import duty fee and costs of shipping vehicles to China. The question now is whether other manufacturers will follow Tesla's lead and build factories in China without a local partner.

However, it would allow Tesla to maintain control of profits and crucially its electric vehicle technology and manufacturing processes, without the worry that proprietary information could leak out into Chinese industry.

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.

According to the Journal, Shanghai's government has given permission to Tesla to build the factory in the city's free trade zone, the first time that's happened for a foreign vehicle company.

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, the world's largest auto market.

Persuading Tesla to manufacture cars within Shanghai, while at the same time pay tariffs on the same, would be a big coup for the government. The effort comes as President Donald Trump, who has been critical of China's trade policies, prepares to visit Beijing early next month.

Tesla had said in June that it was in discussions with the Shanghai government and that it would detail its China manufacturing plans by the end of the year. Instead, Tesla will own the entire factory.

The company declined to comment on the report, Reuters said. Presumably, breaking ground remains a long way off. Current rules require foreign automakers to have joint ventures with local companies for domestic production.

Sources tell the newspaper that the agreement will allow Tesla to set up a facility in the city's free trade zone. However, that would mean sharing profits, and more importantly technology, with the local partner. It was also previously reported in June that Tesla was looking at Shanghai and Guangdong for a plant to expand in China.

It could be that this deal Tesla has brokered removes the tariff somehow. This could help the company quickly gain an edge in the market.

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