Tesla has reportedly come to an agreement with the Chinese government in Shanghai to construct a production plant in the city’s free-trade zone, possibly giving the carmaker a one-of-a-kind edge on the planet’s biggest market for electric vehicles. Details of the agreement, announced Sunday morning by The Wall Street Journal, are still being worked out. However, it is the first of its kind for an outside car manufacturer and could definitely cut production costs for Tesla cars sold in China. Further, the agreement is expected to exclude technology-sharing agreements that can discourage international companies from doing business there.
Tesla has been seeking a Chinese production line for a considerable length of time, and the Shanghai bargain started to come to light in June, following announcements that Tesla sold $1 billion worth of cars in China in 2016, and that it had received significant investment from Tencent Holdings, a Chinese tech giant. Tesla’s push into China confronted a major obstacle: Because of import duties, a Tesla costs around 50 percent more in China than in the United States. A plant in Shanghai’s free-trade zone would cut work and transportation costs. President Elon Musk said in 2015 that a processing plant in the nation could cut the cost of vehicles sold in China by a third.
WSJ writes, however, that cars delivered under the new production line are still liable to be considered “imports” and face a 25 percent duty. Foreign carmakers have only been able to keep away from that tax by forming joint ventures with local producers, which frequently include technology-sharing provisions. China is forcefully seeking total electrification of its vehicle armada, making it a fundamental market for Tesla. However, according to a few specialists, Chinese makers’ dependence on acquired intellectual property could hurt not only remote organizations hoping to contend there but development in clean vehicles more generally. Tesla picking up a foothold in China isn’t just good for the company but for the world.