Tesla’s Chinese Factory Could Cost $9 Billion

Elon Musk previously confirmed that Tesla Motors is looking into securing a location and a local partner for a manufacturing facility in China and it seems that the company has reached an initial agreement.

The automaker has reportedly chosen Shanghai and signed a “non-binding memorandum of understanding” with Jinqiao Group, a local government-owned company; each partner could invest around 30 billion yuan ($4.5 billion) in the factory, Bloomberg writes, citing a source with “knowledge of the matter”.

“This would be a major win for Tesla and Shanghai. The investment will probably include a nationwide dealership network, superchargers, R&D center and potentially a second Gigafactory“, said auto analyst at Bloomberg Intelligence, Steve Man.

Setting joint ventures with local companies is a “must” for all foreign automakers that want to set up manufacturing facilities in the People’s Republic and they can own up to 50 percent stake. Moreover, producing cars in China will help Tesla Motors avoid the 25 percent import levy, which, in turn, will make its EVs more competitive against luxury-brand rivals such as BMW and Audi and local offerings coming from BYD and BAIC Motor.

China is a giant consumer of new cars, globally, and with the introduction of the Model 3 earlier this year, a “flood of pre-orders” for the most affordable Tesla vehicle yet has been received from the Asian country, so opening a plant there means that the brand is looking to satisfy local demand, as Elon Musk previously said.

At the time of writing, Tesla Motors refused to comment on the topic, and so did officials within the Jinqiao Group, while a spokeswoman for the Shanghai municipal government didn’t confirm nor deny the negotiations.