The agreement with the city of Shanghai would allow Tesla to build facilities in its Lingang development zone
Tesla Inc. (TSLA) said it is close to an agreement to produce vehicles in China for the first time.
The agreement with the city of Shanghai would allow Tesla to build facilities in its Lingang development zone. Tesla would need to set up a joint venture with at least one local partner under existing rules and it isn’t immediately clear who that would be.
Setting up local production is key for Tesla to continue growing in China, where Tesla’s revenue tripled to more than $1 billion last year.
Assembling vehicles locally would allow the company to avoid a 25 percent tax that renders Model S sedans and Model X sport utility vehicles more expensive than in the U.S.
Bringing down the costs of electric cars is crucial to Tesla’s ambitions to reach more mass market consumers. Next month, Tesla is slated to begin rolling out the Model 3, a more affordable and smaller electric sedan. Tesla has yet to launch the Model 3 in China.
In the U.S., consumers stood in long lines to place $1,000 deposits for the vehicle. Tesla sold 80,000 cars in 2016 and aims to boost it by about 7-fold to 500,000 annually by 2018.
In March, Tencent Holdings Ltd., China’s biggest internet company, bought a 5 percent stake in Tesla for $1.8 billion. Teaming up with Tencent could help the automaker gain traction in a market where more than 200 companies have announced plans to build new-energy vehicles.
Tesla purchased its only vehicle assembly plant in Fremont, California, from Toyota Motor Corp. in 2010 for just $42 million. The company has estimated the cost of its battery gigafactory near Reno, Nevada, may eventually reach about $5 billion. The company said it plans to build another 4-5 gigafactories in the next few years.
Shares of Tesla (TSLA) are trading at an all time high pre-market trading. Shares have gained 73% year-to-date in 2017.
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