Tesla reaches deal to build electric vehicle factory in China

Tesla reaches deal to build electric vehicle factory in China

In April this year, however, China said it would be removing the 50-percent foreign ownership cap for electric vehicle (EV) and plug-in hybrid auto manufacturers as early as this year, in a move that would benefit Tesla enormously, which doesn't have local manufacturing and imports all the vehicles it sells on the Chinese market-the world's biggest EV market.

The price increase was a direct response to China's new 25 percent tariff on certain American goods, including cars.

Tesla has reached a deal with the Shanghai government to build a factory capable of producing 500,000 electric vehicles a year.

"According to the agreement, both parties will focus their cooperation on jointly promoting technology innovation and industry development, where the city of Shanghai will strongly support Tesla Shanghai", says a translated press release from the Shanghai Municipal People's Government provided to The Drive by Tesla.

Increasing prices could threaten its position in such an important market.

Tesla Chef Executive Elon Musk signed the agreement at an event in Shanghai, which will be home to the plant.

The company said the China factory would not affect production in the United States, which is forecast to increase. It is expected to build about 500,000 cars a year, enough to rival Tesla's main factory in California.

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"The Shanghai plant will certainly improve Tesla's positioning in China and allow it to locally produce and avoid import tariffs".

Tesla hiked prices in China over the weekend to a level more than 70 percent higher than in the United States amid mounting trade frictions between Washington and Beijing that have seen several US imports, including cars, subjected to retaliatory tariffs of 25 percent.

A Tesla spokesperson added, "We expect construction to begin in the near future after we get all the necessary approvals and permits". China accounted for 17 percent of Tesla's 2017 revenue, according a filing with USA regulators. Tesla builds its electric sedans and SUVs at its factory in Fremont, Calif. and ships them to China, which subjects the vehicles to an import tariff.

But it registered a new electric auto firm in Shanghai in May after China announced that it planned to scrap rules on capping foreign ownership of new-energy vehicle (NEV) ventures by 2022.

The youngest publicly held US automaker is looking to expand its capacity and more efficiently reach global markets. Ford, GM, Nissan, Volkswagen and other competitors have announced ventures with local automakers to develop models for China's lower-income market.

Auto brands in China are required to make electric vehicles at least 10 percent of their sales starting next year or buy credits from competitors that exceed their quotas.

Musk has also said the company will reveal plans near the end of 2018 to build a factory in Europe.

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