Tesla in talks with Shanghai to build cars in China

Tesla factory, Fremont, California

Tesla factory, Fremont, California

Tesla may be adding another facility beyond its NUMMI California facility and assembly plant in Tillburg, Netherlands.

The automaker has confirmed it is working with the Shanghai government to take the necessary steps to begin producing cars in China. Right now, Tesla is plagued by the country’s 25 percent import tariff when it brings cars from California to China. According to Bloomberg, a more definite production plan could be in place by the end of 2017.

Most of Tesla’s production is slated to remain in the United States, but producing its cars locally in China will “ensure affordability for the markets they serve,” the automaker said in a statement. It would also greatly help Tesla achieve the necessary economies of scale required and bring down labor and shipping costs. In 2014, CEO Elon Musk said Tesla would begin building cars in China in about three or four years.

All vehicle production happens in Fremont, California factory, with the Dutch site assembling vehicles for European delivery.

The report also states Tesla has signaled a preliminary agreement with Shanghai to build facilities in the city’s Lingang development zone. Per Chinese law, Tesla will need to set up a joint venture with one other Chinese company to receive manufacturing permits.

China has implemented an aggressive new-energy vehicle strategy to combat its air quality problems; the country aims to boost hybrid and electric car sales 10 fold over the next decade. For Tesla, it’s a heck of an opportunity. 15 percent of Tesla’s $7 billion revenue came from China last year.

In the United States, Tesla is gearing up for a different manufacturing milestone: the Model 3. Tesla’s most affordable offering is scheduled to enter production in July.

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