An unnamed source tells Bloomberg that Shanghai now is the leading candidate for a Tesla manufacturing facility in China. The source is anonymous because the negotiations are not yet a matter of public record. He says that Jinqiao Group, a Shanghai government-owned company, has signed a non-binding memorandum of understanding with Tesla that will lead to a $9 billion investment in the area. Tesla will put up half the money in cash, while Jinqiao Group will put up the other half, mostly in the form of real estate. The two will each own 50% of the resulting enterprise.
“This would be a major win for Tesla and Shanghai,” says Steve Man, an auto analyst at Bloomberg Intelligence. “The investment will probably include a nationwide dealership network, superchargers, R&D center and potentially a second Gigafactory.” Building cars in China would allow the American company to avoid the 25% import duty China assesses on cars brought in from other countries. That would make its cars very competitive against other foreign brands like Audi and BMW as well as local manufacturers such as BYD and BAIC.
Shanghai is already a financial and manufacturing center. It is home to SAIC Motor Corp., which has joint ventures with General Motors and Volkswagen. It features excellent rail links to all of China and its port could be key to distributing Tesla automobiles to other Asian nations. It is not the only city hoping to lure Tesla. Suzhou and Hefei are among the other cities that would like to have a Tesla factory, which would be a big boost to the local economy and provide many new opportunities for employment to local residents.
Jinqiao Group “has to date not signed any [memorandum of understanding] or documents with any individuals on a Tesla joint venture factory,” Jinqiao Export Processing said in a statement to the Shanghai Stock Exchange. Calls to Jinqiao Group weren’t answered. The Shanghai Jinqiao Economic and Technological Development Zone, a government body overseeing the area, didn’t respond to a faxed request for comment from Bloomberg.
Khobi Brooklyn, a spokeswoman for Tesla, said the company wouldn’t comment on “rumor and speculation.” A spokeswoman for the Shanghai municipal government would neither confirm nor deny that negotiations are taking place.
Elon Musk has said on numerous occasions that Tesla will have a factory to produce the Model 3 in China eventually. What is not known is whether the company would also manufacture its Model S and Model X in China. In the end, Shanghai may not be the city that Tesla chooses for its Chinese operations, but the Bloomberg story makes it clear that the company has every intention of creating a base of operations in China sooner rather than latter.