According to some reports, Tesla Motors is currently having discussions to establish a factory in Shanghai. This would make the factory the first ever one for Tesla in China. The move could be a major boost for the company in one of its biggest markets in the world. However, building a factory there might also strengthen China’s ambitions to become a powerful electric cars builder. The company revealed this move through a Thursday statement. In it, it was saying that it’s necessary to extend production overseas in order to build cars certain customers will be able to buy. China is one of the first countries which comes to a manufacturer’s mind because it has huge tariffs for imported cars.
Manufacturing cars overseas
According to a company spokesman, Tesla is currently working with the Shanghai Municipal Government in order to see whether or not it would be possible for the company to establish a manufacturing facility in the city. The main purpose of this move is to better serve the Chinese market. While being very committed to the Chinese market, Tesla will also look for various sites where it could better serve other markets around the globe. Still, most of the company’s production is going to remain in the United States.
According to statistics, last year, China represented about 15% of Tesla’s revenue. This was double than the percentage from 2015. While Shanghai city officials didn’t immediately respond to any requests for comment, reports are saying that the company and Shanghai have already signed a preliminary deal. However, it’s worth noting that these negotiations don’t necessarily mean that the company will build a plant there for certain. The problem is the Chinese law which, to do so, would require Tesla to find a Chinese-joint partner.
Serving the Chinese market better
It’s interesting that Shanghai controls the SAIC Motor Corporation, one of China’s biggest automakers. Also, a General Motors and Volkswagen partner. However, it’s not clear if Tesla’s talks with the government would also mean a partnership deal with SAIC. Also, there’s another way in which the company could get around and build a plant. It should build a factory in a foreign trade zone of the country. However, by doing this, it would have to still pay the 25% import duty. The government would treat the plant as being outside China.
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