tesla showroom

The Tesla showroom at the Washington Square Mall, in Portland. Source: AP

Tesla’s first China-based factory reportedly in the works

TESLA INC. is reportedly close to sealing a deal with the Chinese city of Shanghai to open its first manufacturing facility for its electric cars, which would open up the largest car market in the world as well as help the company’s quest to make electric cars ubiquitous and cheaper.

Elon Musk’s innovation giant’s deal would pave the way for the company to set up its facilities in Shanghai’s Lingang development zone, Bloomberg reported, though negotiations and details remain private.

There are several benefits for Tesla – and indeed the entire automotive market – if the deal went through, with the most significant being the company’s ability to avoid a 25 percent tax levied on foreign companies without production facilities in the country. This would otherwise render the Model S and Model X cars far more expensive than they would be in the US.

Furthermore, though the deal would also require Tesla to take on a local partner, the deal could also provide the company with a significant foothold in a country where domestic brands proliferate and foreign companies have largely struggled. The new facility would be absolutely paramount if Musk wants to keep growing his company’s base in China, where Tesla saw their annual profits triple to more than US$1 billion in 2016.

elon musk

Musk speaks during the 67th International Astronautical Congress in Guadalajara, Mexico, Tuesday, on Sept. 27, 2016. Source: AP

Tesla’s electric car technology aligns closely with China’s new determination to cut carbon emissions drastically, as part of their commitment to adhere to the Paris Climate Accords. The growing availability of Tesla’s widely lauded vehicles could be an important development for the country notorious for being choked by smog and pollution.

Recently, the government identified clean energy automotives as a “strategic emerging industry”, according to Bloomberg, and has put into place plans to boost sales of plug-in hybrids and fully electric cars over their fossil-fueled counterparts. As a result, Tesla could stand to benefit from the not-inconsiderable power of China’s powerhouse manufacturing capabilities, which could drastically push down the cost of these vehicles and prime the models for mass market consumers.

SEE ALSO: Malaysia: Grab partners with GreenTech to offer rides in Tesla all-electric car

Chinese influence in Tesla has a long history, with notable investors including Tencent – who owns a five percent stake in the company.

The Lingang facility would be the company’s second assembly factory, with the first in Fremont, California. The company is setting up an ambitious battery gigafactory in the state of Nevada, which could cost them as much as US$5 billion.