UPDATE: Tesla Signs Agreement To Build EVs in China


*UPDATE: Bloomberg reports that it’s a done deal. Here’s the statement from Bloomberg on the matter:

“Tesla Inc. has signed a preliminary agreement with the city of Shanghai to explore production in China, moving the electric-car maker a step closer to lowering its manufacturing and shipping costs, according to people familiar with the matter.”

“The agreement was reached Thursday in Shanghai, said the people, who asked not to be identified before the information is made public. A representative for Tesla couldn’t immediately comment. A spokesman for the Shanghai government said he’s seeking information from the relevant departments.”

Bloomberg reports that Tesla is close to an agreement to produce electric cars in China, and that the deal could be announced as soon as this week.

Tesla Flag Put Up In Beijing

Establishing a manufacturing plant in China is very important for Tesla, as this is the only way to avoid a 25% import tax, and of course to also potentially catch onto the country’s “New Energy Vehicle” (plug-in) subsidy programs – of which are only offered to domestic manufacturers.

The largest issue behind building EVs locally is the requirement to have a joint venture with a Chinese manufacturer, which always brings up concerns of a “knowledge” drain…and of course splitting any potential profits.

Foreuign automakers typically acquiesce with the JV partnership requirement, as China is the largest automotive market in the world, and is important to them from a global business point of view.

Tesla’s revenues of more than $1 billion in 2016 for China could increase quickly – provided the cars could be offered much cheaper.  Further inexpensive part sourcing for global products could also be a benefit.

Bloomberg mentions Shanghai as potential partner:

“The agreement with the city of Shanghai would allow Tesla to build facilities in its Lingang development zone and could come as soon as this week, said the people, who asked not to be identified because the negotiations are private. Details are being finalized and the timing of the announcement could change. Tesla would need to set up a joint venture with at least one local partner under existing rules and it isn’t immediately clear who that would be.”

In March, Tencent Holdings Ltd., China’s biggest internet company, took a 5% stake in Tesla for $1.8 billion, which may also will play a role in hammering out the deal.

source: Bloomberg

Category: China, Tesla


33 responses to "UPDATE: Tesla Signs Agreement To Build EVs in China"
  1. Boukman says:

    I might be wrong, but my understanding was that in order to qualify for China’s “new energy vehicle” subsidy, one basically needs to use batteries made by Chinese companies, mainly the LiFePO4 chemistry. Wasn’t there something lately about South Korean battery manufacturer finding out they didn’t qualify even if they built their batteries in China?

    1. Pushmi-Pullyu says:

      Yes, but the official reasons given for Chinese policy, and the actual motive for that policy, may be two very different things. Some have suggested the actual motive, in blocking sales of LG Chem cells from South Korea, was the Chinese Communist Party illustrating its displeasure with S. Korea deploying an anti-missile defense system.

      I think a non-Chinese company doing business in China is like taking a walk along a pretty garden path… in the middle of a minefield. The huge market is attractive, but businesses have to walk very carefully, and things can go bad without warning in an instant.

      At any rate, presumably Tesla is aware of the battery issue, and will proceed accordingly. Or, it being China, perhaps they’ve found the right palms to grease to “facilitate” the deal.

      “An honest politician is one who, when he is bought, will stay bought.” — Simon Cameron

      I’m rather unsure of how many Chinese politicians are that honest. 😉

  2. Epicurus says:

    25% import tax? I thought President Tiny Hands was going to put a stop to one-sided trade practices like that?

    1. Mil says:

      I think he was going to stop the one sided agreement by imposing an equivalent import tax for Chinese products into the USA.

      1. (⌐■_■) Trollnonymous says:

        Just like all politicians before him, this will not get done.

        1. Mark.ca says:

          Of course it won’t happen. Think of all the money the retailers spent on the past election.

    2. Pushmi-Pullyu says:

      “I thought President Tiny Hands was going to put a stop to one-sided trade practices like that?”

      Like most of wannabe dictator El Trumpo’s megalomaniac grandiose plans, that did not survive contact with reality. El Trumpo (or those of his advisors slightly less incompetent than the others) quickly realized he needed China’s cooperation in trying to deal with North Korea’s nuclear brinkmanship. El Trumpo displayed his brilliant command of the “art of the deal” by folding quickly, pulling back from even the first step of officially proclaiming China a currency manipulator, as he had promised.

      Or to put it another way, the realpolitik way, Chinese politicians displayed their “art of the deal” by once again using their client state North Korea as an “attack dog” to get the USA to keep playing along with its flagrantly unfair trade practices. China pretends to want to end N. Korea’s nuclear brinkmanship, but the reality is that they have been, and still are, transferring both nuclear weapon technology and missile tech to N. Korea.


      1. instant tq says:

        do you want to say, that NK is like a proxy state for China to express aggressive side of external politics towards US and Japan? that actually explains many things

        1. Pushmi-Pullyu says:

          I wouldn’t go that far. Perhaps “attack dog” isn’t the best analogy. It’s not that N.K. will attack at China’s command, it’s that N.K. is a vicious dog that wants to attack its neighbors, and the only thing holding it back is China’s hand on the leash.

          Political analysts say that China doesn’t exert that much direct control over the actions of N. Korea towards its neighbors. However, given that the N.K. regime is utterly dependent on food and oil from China, one might suggest that China could exert more influence if it chose to. Perhaps China sees it as a benefit for N.K. to be a “loose cannon” in the region.

          1. instant tq says:

            well I think it even gives a reason for existance of such silly state as North Korea. I’ve seen a video on YT about NK where “tourist” visits some “car dealer”, it was complete joke. All the cars there were rebaged chinese models, and all people around were actors.

  3. Mister G says:

    This might mean cheaper Teslas in the USA.

    1. Mark.ca says:

      If they try to sell me a Made in China Tesla then they shouldn’t bother. Not buying!

      1. Mister G says:

        LOL what about a brand new MODEL S P100D for $80k? Would you bite? Americans love bargains…don’t believe me? Look at Wal-Mart LOL everything is made in China and Americans are addicted LOL

        1. Stimpacker says:

          No, no you got it wrong. That’s not the Chinese plan.

          First, the JV steals all your secrets while you get access to their market for some years.

          When they no longer need you, suddenly the rules will be changed to force you to leave.

          Then much later, they may try to sell their cheaper copycat product to Americans after they’ve become the biggest local player. See cellphone market for example.

          1. Nix says:

            Tesla has an open license for their IP.

            Elon couldn’t be happier if every car company improved their EV’s. His primary goal is to jump-start the electric car industry, not to have a monopoly on EV sales.

  4. Ron M says:

    Well I’m sure Musk will build cars with his batteries since there the best on the market. It seems hard to build a factory in another country but for Musk it’s a walk in the park. With China goin gung ho on renewable and EV’s Tesla will sell a lot of EV’s in China. Maybe they’ll build the cars there and the batteries later, although a gigafactory battery plant won’t be far behind.

    1. Agzand says:

      How is it hard? Every single automaker has a plant in China.

  5. CDAVIS says:

    Like or dislike Trump…he is 100% correct when he says America/China trade is bigly lopsided. I don’t know if it’s that on China’s side they are smarter than the American’s in trade negotiations or that American politicians have received personal benefits in favoring China’s interest over America’s (perhaps a combination thereof).

    1. Ron M says:

      Yeah Trump complains about China taking American jobs but Trump branded products are made in China and sold in high end American stores.

      1. (⌐■_■) Trollnonymous says:

        That’s the “American Way!”.

        Just like stocks, buy low, sell high.

    2. Pushmi-Pullyu says:

      I don’t know if it’s that on China’s side they are smarter than the American’s in trade negotiations…

      It’s not that Chinese negotiators are smarter, it’s that they are in a much stronger negotiating position. “If you don’t continue to give us ‘Most Favorable Nation’ trade status, we’ll stop loaning you money to support your deficit spending.” That’s a hard argument — or rather, threat — to counter. Plus, as I said earlier, using N. Korea as an attack dog for an extra threat.

      Political and economic relations with China is a thorny problem, one which is extremely unlikely to be solved by the disorganized, clueless, and horrifyingly incompetent Trumpster administration.

  6. Rob says:

    This will be an intergrated Gigafactory to produce everything for the local Asian markets. Nothing will be imported to the US, at least for a very long time. Us Demand will be covered by the current facilities and the coming Model Y Plant to be announced by Y/E in the US. Europe will get a location announced later this year.

    In the mean time the US plant will export around the world for years, and likely always for North America.

    There is no “Trump” policy conflict as they are created local jobs for local markets, not to import back to the US.

    1. Pushmi-Pullyu says:

      “Nothing will be imported to the US, at least for a very long time.”

      That’s not a very realistic scenario. As Tesla matures, it will certainly start importing and exporting more parts and cars. Established auto makers use currency exchange rates and different suppliers in different parts of the world to balance their profits, expenses, and pricing on an international basis. Tesla will be doing that more and more as it grows.

      Elon’s plan to use local/regional sourcing as much as possible to reduce shipping costs and times, has obviously not worked out as well as he hoped. In fact, we’ve already seen reports that the Model 3 is using more imported parts than Tesla’s previous cars.

  7. ffbj says:

    Just think the reverse of Michigan and you will get an idea of how the Chinese government thinks & feels about Tesla.
    They want Tesla’s now & cheaper, and they want the most advanced production car in the world to be produced there, so does Tesla, and so it will happen.

    1. unlucky says:

      They also want advanced cars to be made in China because then they can steal any useful secrets much more easily.

      They already stole all the useful techniques and info on ICE cars from VW and GM, time to go to the next level.

      1. ModernMarvelFan says:

        Elon is already willing to give it to the world if they promise to build good EVs with it… So technically speaking, the Chinese doesn’t have to steal anything if it is given to them as Elon promised.

  8. leafowner says:

    We will see a Tesla plant planned in every major region in the world within 5 years

  9. (⌐■_■) Trollnonymous says:

    This shiould be easy for Tesla. Most of their patent stuff is already available free.

    Good Luck in China!

  10. Detroit Electric Fan says:

    “Tesla would need to set up a joint venture with at least one local partner under existing rules and it isn’t immediately clear who that would be.”

    I don’t blame the Chinese government for wanting to protect their fledgling domestic automakers. However, it is pathetic that they still resort to this requirement just so they can learn trade secrets from more mature car companies. If I was head of the U.S, I would make it so that the same rules would apply to Chinese automakers when they finally launch here.

    1. CDAVIS says:

      @Detroit Electric Fan said: “…I would make it so that the same rules would apply to Chinese automakers when they finally launch here…”


    2. ModernMarvelFan says:

      That is fine. But according to WTO rules, that is not how it works. China is classified as “developing” economy and most countries such as US and Europe and Japan are “developed” economy. They are on two different playing field.

      The rule was set to allow developing economy to develop its own industry while “catching up” to the developed world. Else why would “developing” economy freely open up their economy/market so developed economy/superior economy can just crush it?

      It was done on purpose to give them a handicap. The rules are set that in pre-set amount of years, those restriction would have to go away once their own industry is strong enough to compete on “fair terms”. Until then, the tariffs are within WTO rules.

      Of course, China is known to violate some of those rules. That is when US and Europe can take China to WTO court and when they win, they can slap tariff or fines on the products imported into the country.

  11. John says:

    This is not good. Tesla should not make its cars in China. Once they learned all the tricks, they will crush Tesla in China first, then all over the world. Just look at Apple iphones, it used to be the status symbol in Chins.Not anymore, now China directs its citizens sway from Apple toward Android copycats like Huawei and Oppo. All the premium exotic cars still command astronomical price in China because they simply cannot reproduce them. There are 10 super electric cars already in China with subpar electric range and acceleration all in copycats European exotic car skins. China excels in shameless skin or facade copycatting and no lawsuits succeed in China. This move spells the doom in Tesla.