Tesla in talks to set up factory in Shanghai

BEIJING/DETROIT: Tesla Inc took a step closer towards establishing an electric vehicle manufacturing plant in China with its announcement on Thursday that it is in exploratory talks with the Shanghai municipal government.

Tesla has said it wants to build electric cars in China to avoid a 25 per cent tariff on imported vehicles.

The company said it expects to “more clearly define” its China production plans by year end.

China’s central government requires foreign companies such as Tesla to have a Chinese partner in new car manufacturing ventures, with the foreign company owning no more than 50 per cent.

Tesla did not say which companies it might partner with, sparking online speculation. At least three companies — Shanghai Electric Group Co, Shanghai Lingang Holdings Co and Tianjin Motor Dies Co — reported in exchange filings that they were not in touch with Tesla on its plans in response to reports implicating them.

Much of the speculation was centred on Tencent Holdings Ltd, the Internet giant that is China’s largest company.

Earlier this year, Tencent acquired a five-per cent stake in Tesla for US$1.8 billion (RM7.70 billion).

Tesla has not said which vehicles it plans to build in China.

However, a supplier familiar with the company's thinking said it was considering the Model 3 sedan and a crossover companion called Model Y.

In a separate development, US Trade Representative Robert Lighthizer said on Thursday he was concerned about Ford Motor Co’s announcement that it will move some production of its Focus small car to China and import the vehicles to the US.

“If it happened for reasons that are non-economic reasons, then I think the administration should take action,” said Lighthizer.

Tesla is the most valuable US carmaker, with a market capitalisation of more than US$60 billion. Reuters