The electric auto maker has reaffirmed that it is talking with the Shanghai municipal government regarding the set up of a factory in the region.
Such a deal would likely reduce Tesla's manufacturing costs, though it would still have face the 25pc import tax levied on foreign vehicles sold in China.
China is poised to become the world's largest electric vehicle market and the government has a positive attitude for the same.
Sources tell the newspaper that the agreement will allow Tesla to set up a facility in the city's free trade zone. The question now is whether other manufacturers will follow Tesla's lead and build factories in China without a local partner.
In a statement, Palo Alto, California-based Tesla reiterated that it's working with Shanghai's government to explore local manufacturing. According to Fortune, Tesla reported over $7 billion in revenue for 2016, with more than $1 billion of that coming from China alone. Tesla is deeply committed to the Chinese market, and we continue to evaluate potential manufacturing sites around the globe to serve the local markets.
According to an agreement with the Chinese government, Tesla would get ownership rights over its plant in the foreign land. In the earlier times, some foreign automakers have built their cars in China, but now China wants local partners to avoid the 25 percent tariffs in building those vehicles.
This operation would be inside one of China's free-trade zones, said the people familiar with the situation, who have requested anonymity.
The magazine's prediction that the Tesla Model 3, which has faced production bottlenecks, will have average reliability illustrates the challenges automakers face.
If the deal indeed pushes through, then Tesla will retain its independence and technologies while potentially gaining a prominent position in China. China is a leader in the manufacturing of electric cars. The company had confirmed that it was talking to Shanghai's government about a factory at the same time.
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