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Tesla Closing in on Deal to Build Cars in China

EV maker inking deal with city of Shanghai.

by on Jun.21, 2017

Tesla is apparently closing in on a deal to build new cars in Shanghai.

Not long after suggesting a new plant in India was coming, it appears Tesla’s Elon Musk is making headway on plants around Asia, especially China.

The EV maker is reportedly close to an agreement with the city of Shanghai to build a new plant in the city’s Lingang development zone. The deal could be done in just a few days, Bloomberg reported.

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China’s central government has been pushing hard for an increase in electric vehicle sales in the last two years, providing incentives and easing regulations to help manufacturers get moving on the needed escalation of EVs.

However, Tesla has been on the outside looking in on this push due to China’s requirement that foreign firms form partnerships with local entities to manufactures items, such as cars, in the country. After a rough start in the country – a squatter took the Tesla name and wouldn’t allow the company to use it – the automaker is at the cusp of taking off.

(Tesla looking to make move to India. For the story, Click Here.)

The timing is good for two reasons. First, China is one of more than a dozen countries that agreed to ensure that 30% of all new vehicles sold would be battery-electrics. Second, Teslas are apparently in high demand in China and the company has just one factory for all of its vehicles.

Tesla must set up a joint venture with at least one local partner but right now, no company has been announced. China has identified new-energy vehicles as a strategic emerging industry and aims to boost annual sales of plug-in hybrids and fully electric cars 10-fold in the next decade.

A total of 283,000 EVs were sold there last year, making up 41% of global sales, according to Bloomberg New Energy Finance. About 15% of Tesla’s $7 billion in revenue last year was generated in China, according to data compiled by Bloomberg.

Musk’s been looking to set up shop in China for some time and he has been putting the pieces in place to do so. In March, China’s second-most valuable internet company, Tencent Holdings Ltd., became a Tesla investor, with the owner of China’s messaging app WeChat spending $1.8 billion for 5% of Tesla. A month later, Musk went to Beijing to meet with Vice Premier Wang Yang, according to the state-run Xinhua News Agency.

(Tesla’s Musk wants to use solar energy to power up Supercharger charging stations. Click Here for the story.)

The move comes as the company is readying for the launch of its “mainstream” vehicle, the Model 3, and a possible move into India. Setting up shop in India has been discussed for many months. However, it slid off the radar screen until recently.

Musk, who’s known for his use of Twitter, was asked by several Indian tweeters when he would be bringing the Tesla’s to India. It didn’t take long for the buzz to start after Musk’s response.

“In discussions with the government of India requesting temporary relief on import penalties/restrictions until a local factory is built,” he tweeted.

(To see more about Tesla’s new Roadster doing 0-to-60 mph in less than two seconds, Click Here.)

The plan had been for Tesla to begin selling vehicles in India this year, but clearly based on his missive, that got derailed by other issues. However, India, like China, also signed on to the 30% by 2020 deal and moving Tesla into the market there would help make that a possibility.

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