Tesla working out a deal to set up a factory in China

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Tesla has reportedly made a deal with the government in Shanghai to open up a manufacturing facility in the city's trade-free zone, the Wall Street Journal reports.

Such a deal would likely reduce Tesla's manufacturing costs, though it would still have face the 25pc import tax levied on foreign vehicles sold in China.

No timeframe for the launch of the Tesla plant was given.

The electric auto maker has reaffirmed that it is talking with the Shanghai municipal government regarding the set up of a factory in the region. Nothing can be more optimistic for the e-car manufacturer than forging a deal to build a new factory for their vehicles in China. China's electric-vehicle market is already the world's largest and is expected to continue growing fast, especially since the government plans to require that all automakers' sales include a certain percentage of electric vehicles from 2019. Tesla apparently feels that not sharing its technology with a local company is worth more than avoiding the 25% fee would be. Until now, USA carmakers like GM hoping to sell cars in China's domestic market have been forced to work (and more importantly share profits and technology) with a local partner. If the Tesla agreement is reached, the EV maker would be the first foreign manufacturer to build vehicles in China without a local manufacturing partner.

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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. It was also previously reported in June that Tesla was looking at Shanghai and Guangdong for a plant to expand in China. The Chinese government plans to roll out a system where automakers must make sure a portion of the cars they manufacture are electric.

Two of those people said they were not aware of any material change when they were contacted yesterday about the Wall Street Journal report. Details of an announcement about the deal were being finalized.

The company's well known vehicle models included Tesla Roadster, Tesla Model S, Tesla Model x and Tesla Model 3.