Tesla Inc. reached an agreement with Shanghai’s government to open its first manufacturing factory in China, the Wall Street Journal cited its sources on Sunday. The plant, which will be located in Shanghai’s free-trade zone, will be wholly owned by Tesla with no local partners, but the automaker won’t be able to avoid China’s 25% import tariff. Having a factory in China would reduce the company’s transportation costs and provide a more direct access to the Chinese supply chain.
The world’s most populous country has the largest electric vehicle market and its government plans to introduce rule for all automakers to have a certain percentage of electric cars sales from 2019. In 2016, Tesla’s sales tripled in China to around one billion dollars with over 11,000 deliveries. In addition, Tesla continued to have strong sales in the country this year as over 40% of all the electric vehicles sold worldwide were sold in China.
So far, Tesla didn’t comment on this report and added that an official announcement will be made by the end of this year. In June, the corporation did confirm that it was in talks to build a factory in Shanghai, but the spokesperson added the automaker plans to keep most of its production in the United States.