Tesla has reportedly struck a deal to set up a plant in Shanghai to make cars for the Chinese market.
The Wall Street Journal reported that the details are still being finalised, but that the agreement will allow Tesla to build a wholly-owned factory in Shanghai's free-trade zone.
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However, the report suggested that putting the plant in the free-trade zone could mean that its output is subject to import tariffs in China. Nevertheless, a plant in Shanghai's free-trade zone would reduce transportation and labour costs for Tesla.
Tesla has yet to confirm that a deal has been struck.
Tesla is said to have decided that a plant in China is a priority, particularly as China's market opens up as a big opportunity for EVs, helped by official incentives.
China's government is reportedly considering a relaxation of its rules applying to foreign inward investment in order to boost the EV market and sector in the country. If Tesla strikes a deal that allows it to operate a wholly-owned subsidiary making cars in China, that would be an unprecedented development. Car firms investing in China have had to partner with local companies – who have overall control – and work with them on technology transfer. Tesla is said to be wary of having such a close relationship with a local Chinese partner.
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By GlobalDataBloomberg reported last month that Beijing is discussing a plan to allow foreign carmakers to set up wholly owned EV businesses in its free-trade zones. It would be a major change as China has insisted, since the 1990s, that foreign automakers operate with local partners in joint ventures.
However, some commentators have suggested that China's free-trade zones are heavily geared to encourage exports and that operating from them to supply China's domestic market may still require partnering with a local firm.
