Tesla reaches deal to build electric vehicle factory in China

Tesla reaches deal to build electric vehicle factory in China

A day after it announced price hikes for the Model S and Model X in China, in response to new tariffs on imported electric cars in the country, Tesla has finalized a deal to build a new factory in Shanghai, according to a Bloomberg News report. Tesla sales in the China market have also slowed considerably. The factory and its output are planned to dwarf Tesla's current US production capabilities, and it comes after a year of negotiations between the electric automaker and Shanghai local government in China.

In a statement from the Shanghai Municipal People's Government that was translated into English and which Tesla provided to this news organization, Musk said the Shanghai operation "will be a state-of-the-art vehicle factory and a role model for sustainability".

Tesla chief executive Elon Musk will meet with Chinese officialsBeijingnghai and Baijing this week. Analysts have predicted the company will raise capital to fund a list of new projects, including launching an electric semi truck, a pickup truck, a compact SUV and new battery and vehicle production facilities that Musk has proposed for China and Europe.

Tesla didn't respond to a request for comment on the price rises. The automaker hopes to eventually build some 500,000 vehicles per year at its Shanghai plant.

But Tesla and producers including GM and Nissan Motor Co. had been reluctant to transfer manufacturing to the country due to the requirement to share technology with Chinese partners that might become rivals.

A woman sits in a Tesla Model 3 vehicle at the Auto China 2018 motor show in Beijing on April 25, 2018. It said production would begin two to three years after that and eventually increase to 500,000 vehicles annually. That level would be more than double the current USA market, where new light vehicle sales run at about 17 million vehicles a year.

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In May, Tesla slashed up to $14,000 off its Model X in China after Beijing said it would cut import tariffs to 15 percent from 25 percent for most vehicles from July 1.

Musk was talking about building a Chinese factory long before the Trump administration proposed punitive tariffs on Chinese goods.

CNET reports that the tensions between the US and China caused the electric auto maker to raise the prices on its Model S and Model X vehicles.

Tesla sold 14,779 vehicles in China previous year, according to data from LMC Automotive. Tesla builds its electric sedans and SUVs at its factory in Fremont, Calif. and ships them to China, which subjects the vehicles to an import tariff.

Auto brands in China are required to make electric vehicles at least 10 percent of their sales starting next year or buy credits from competitors that exceed their quotas.

BMW also announced plans to increase production in China, but it said that was because of increased demand for vehicles there.

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