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Tesla working with the Shanghai government to explore local manufacturing in China

Tesler explore local manufacturing in China

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SHANGHAI, China - In a bid to achieve economies of scale and bring down manufacturing, labor and shipping costs - Tesla has said that it is working with the Shanghai government to explore local manufacturing in China.> BNN
According to an emailed statement, Elon Musk’s company expects to more clearly define production plans by the end of the year.
Most of Tesla’s production is expected to remain in the U.S., while the California-based company said it needs to establish local factories “to ensure affordability for the markets they serve.”
Tesla is expected to reach a deal to produce cars in China and the company believes it will help it better compete with local rivals because it would eliminate a 25 percent import tariff that makes Tesla’s Model S sedans and Model X sport utility vehicles more costly than in U.S. 
Tesla is scheduled to begin production of the Model 3 in July - which is the cheapest model in its lineup so far, from its lone assembly plant in California.
Bill Russo, managing director of Gao Feng Advisory Co. and a former head of Fiat Chrysler Automobiles NV’s Chrysler unit in China said in a statement, “The entrance of Tesla into local production is a necessary step for Tesla to gain relevance in the world’s largest EV market. Tesla’s participation thus far has been limited to imported Model S and Model X cars. However, unlocking the mass market will require a price point that is only achievable with a locally produced Model 3.”
Tesla shares, that are up 78 percent this year, rose 1.2 percent to $380.92 at 11:12 a.m. in New York. 
The company has not specified which Tesla products are being considered for local manufacturing in China.
China aims to boost annual sales of plug-in hybrids and fully electric cars 10-fold in the next decade. 
According to the China Association of Automobile Manufacturers, last year, 507,000 new-energy vehicles including electric cars were sold in the country. 
Further, about 15 percent of Tesla’s $7 billion in revenue last year was generated in China.
According to reports, Tesla has signed a preliminary agreement with the city of Shanghai to produce vehicles in China for the first time. 
Sources have revealed that the agreement would allow Tesla to build facilities in Shanghai’s Lingang development zone. 
According to existing rules, Tesla will also need to set up a joint venture with at least one Chinese company to obtain the necessary manufacturing permits.
In a filing, Shanghai Lingang Holdings Co., a state-owned industrial zone developer and landlord, said it hadn’t had contact with Tesla. 
The carmaker released a statement on Thursday that said it’s been working directly with the Shanghai municipal government.
Fu Yuwu, president of the government-backed Society of Automotive Engineers of China said, “It’s just at the right moment for Tesla to localize production because China now has suppliers with world-leading technology. Tesla will also need to develop customized mass-market products for Chinese market, which is unique from the rest of the world.”

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