Tesla Has reached an agreement to set up A Factory in Shanghai

Electric-car maker Tesla Inc. is moving closer to increasing its market share in China for becoming the first foreign car company. The company said that it is planning to open its own manufacturing facility in Shanghai by end of the year.

The deal could enable Tesla to reduce production costs but it can sustain China’s 25 percent import tax.  In the earlier times, some foreign automakers have built their cars in China, but now China wants local partners to avoid the 25 percent tariffs in building those vehicles.  It will results in losing control over the finished product, sharing trade secrets with a local company and splitting profits. Currently, Tesla is preparing for the announcement of deals with the Shanghai government.

China’s is already growing with the most electric passenger vehicles in the world.  The company has about 200 million electric two-wheelers, 3 million to 4 million low-speed electric vehicles and 300,000 electric buses too.

Chief executive of Automobility, a Shanghai-based consultancy and a formal Chrysler executive, Bill Russo said, “Whatever deal Tesla gets, others will want it too.”

In recent years, Tesla’s business is suffering from a critical component of solving manufacturing issues. Recently, the company launched Model 3 which had a disappointing initial quarter because it failed to meet the requirement.

The company criticized manufacturing subsystems taking the longer time to activate than expected. Elon Musk, CEO of Tesla has set progressive goals of delivering 500,000 Model 3 every year. China will be a part of meeting this impressive goal.

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