Tesla’s China dream threatened by standoff over Shanghai factory
Tesla Inc, the biggest-selling electric carmaker in the US, is in danger of being relegated to an expensive niche in China because Elon Musk can’t clinch a deal to open a factory there.
More than seven months after Tesla said it was working with Shanghai’s government to explore assembling cars, an agreement hasn’t been finalised because the two sides disagree on the ownership structure for a proposed factory, according to people with direct knowledge of the situation. China’s central government says the plant must be a joint venture with local partners, while Tesla wants to own the factory completely, the people said, asking not to be identified because the negotiations are confidential. Currently, all foreign automakers must partner with Chinese companies in order to manufacture locally. Tesla’s sluggishness in starting local manufacturing means it’s fumbling a chance to capitalise on China’s hard sell for newenergy vehicles, including EVs, plug-in hybrids and fuel-cell vehicles. President Xi Jinping’s administration wants to scrub notorious air pollution and reduce dependence on imported oil, and it’s doling out billions of dollars in subsidies to entice consumers away from gas guzzlers.
“It’s a market they need to get a foothold in,” said Jeffrey Osborne, a New York-based analyst for Cowen & Co with an underperform recommendation on Tesla.
Tesla declined to comment on its negotiations with the Chinese government over local production. The Ministry of Commerce, National Development and Reform Commission, and the Shanghai Economy and Information Commission— which are all involved in the deliberations— didn’t reply to questions faxed at their requests.