Markets

Tesla Narrowing in on Shanghai Factory

Tesla Narrowing in on Shanghai Factory

The new company will focus on electric cars, spare parts and batteries.

"We don't have anything new to add on this registration for now", a Tesla spokeswoman told Reuters on Monday.

Tesla could be on the verge of announcing a Gigafactory in China after registering a new company in Shanghai's Free-Trade Zone.

China's relaxing of foreign automaker ownership is undoubtedly fueling Tesla's recent moves in Shanghai.

Specifically, Tesla China has setup a wholly-owned subsidiary in Shanghai with about $15.8 million in capital, according to Bloomberg.

China recently announced that foreign companies can operate 100 per cent-owned factories in the country, making the market a particularly tantalizing destination for Tesla.




Currently, China restricts foreign auto firms to a maximum 50 percent ownership of joint ventures with local companies.

Now all Tesla cars sold in China are imported from the US. During the company's most recent earnings call Musk suggested a formal Chinese factory announcement could come as soon as the third quarter of this year. This is a diametric shift for the country, as it has not allowed any foreign auto company to own more than 50% stake for more than 20 years. In fact, it looked like Elon Musk's gamble on China was going to fail.

The U.S. carmaker has been in protracted negotiations to set up its own plant in Shanghai to produce vehicles locally, helping bolster its position in the country's fast-growing market for electric cars and to avoid high import tariffs.

China is an important marker for Tesla, as well as for General Motors. Of this amount, about $2 billion of the revenue was contributed by the Chinese market.

Last year, China rolled out a plan to eliminate internal combustion engines in cars by 2040.


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