Tesla Close To Announcing New Factory In Shanghai (Updated June 22)

Update June 22: It’s official. A new report by Bloomberg says Tesla has signed a preliminary agreement with the city of Shanghai to “explore production in China.”

Rumors of a new Tesla factory in Shanghai, China, have been flying around the internet for months. And just as quickly as they popped up, Tesla batted them away, saying they were just speculation, there was nothing official, it was looking at several locations in China, it had made no decision yet, and things of that nature.

Tesla China plans

Now, according to Bloomberg, an official announcement will come as soon as next week. Unnamed sources say the company has reached an agreement with the city of Shanghai to construct a new factory in the Lingang development zone. Under Chinese law, Tesla will be required to enter into a joint venture with a local Chinese company in order to get permission to build a factory there. The Silicon Valley–based company is anxious to avoid the 25% import duty it currently pays to bring its cars into China.

The reports so far do not reveal who Tesla’s partner might be. Nor do they indicate whether another battery factory will be constructed either at the manufacturing site or at a separate location in the country. Elon Musk said recently that Tesla is considering up to 12 new battery factories in various locations around the world in coming years.

With the Chinese government apparently sticking to its plan requiring all automakers to sell enough “new energy vehicles” to garner credits equal to 8% of total sales starting in 2018, the Chinese market for electric cars, which already dwarfs other electric car markets, could get that much bigger. It’s a business opportunity that Tesla cannot afford to miss. The Chinese new car market is also the largest in the world, with more than 23 million new vehicles sold annually.

Tencent Holdings, China’s biggest internet company, purchased a 5% share in Tesla earlier this year. Having support from such a high-profile Chinese company has to be good news for Tesla in a country where up to 200 companies have expressed interest in building electric cars.

Steve Hanley

Closely following the transition from internal combustion to electricity. Whether it's cars, trucks, ships, or airplanes, sustainability is the key. Please follow me on Google + and Twitter.