With China’s strict laws regarding foreign manufacturers, it seems that maybe producing Tesla cars in China was something that wouldn’t happen. However, a new statement made by Tesla reveals that they are indeed with the Shanghai government to explore the possibility of manufacturing in China.
Elon Musk expects to have a clearer picture regarding production plans by the end of the year. Most of Tesla’s production will remain in the US, but as far as foreign markets go, Tesla says that it is important that they establish local factories “to ensure affordability for the markets they serve.”
Selling Teslas in China currently comes with a hefty 25 percent import tariff, which makes the Model S and Model X in China much more costly than in the US. By manufacturing the cars locally (and the upcoming Model 3), Tesla can eliminate the tariff and compete better with local rivals.
Bill Russo, the managing director of Gao Feng Advisory Co. and former head of Fiat Chrysler Automobiles NV’s Chrysler unit in China, says:
“The entrance of Tesla into local production is a necessary step for Tesla to gain relevance in the world’s largest EV market. Tesla’s participation thus far has been limited to imported Model S and Model X cars. However, unlocking the mass market will require a price point that is only achievable with a locally produced Model 3.”
Tesla has signed a preliminary agreement with the city of Shanghai to produce its vehicles in China for the first time. The agreement allows Tesla to build and operate facilities in the Lingang development zone of Shanghai. Under existing rules, Tesla would also be required to set up a joint venture with at least one existing Chinese company in order to obtain the necessary permits.
Fu Yuwu, president of the Society of Automotive Engineers of China, says:
“It’s just at the right moment for Tesla to localize production because China now has suppliers with world-leading technology. Tesla will also need to develop customized mass-market products for Chinese market, which is unique from the rest of the world.”
SOURCE | Bloomberg