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Tesla has reached a deal to build a factory in China

  • Tesla has made an arrangement with Shanghai's government to built a manufacturing plant in the city's free-trade zone, according to The Wall Street Journal
  • The WSJ reports that Tesla will own the factory, rather than partner with a local manufacturer, as it typically the case
A power cable is seen plugged into a Tesla Roadster at the former Tesla headquarters in San Carlos.
Justin Sullivan | Getty Images
A power cable is seen plugged into a Tesla Roadster at the former Tesla headquarters in San Carlos.

Tesla has made an arrangement with Shanghai's government to built a manufacturing plant in the city's free-trade zone, according to The Wall Street Journal, which cites reports from people briefed on the company's plans.

The WSJ reports that Tesla will own the factory, rather than partner with a local manufacturer, as it typically the case. Chinese officials have recently begun to consider relaxing some of the more stringent rules concerning local partners, as a way to encourage electric vehicle manufacturers. The arrangement would be the "first of its kind for a foreign auto maker," but will likely not allow Tesla to avoid a 25 percent import tariff.

In June, Tesla confirmed that it was in talks to build a factory in Shanghai, ending months of speculation about the company's plans. At the time, a spokesperson explained that while the company anticipated keeping most of its production in the US, it did "need to establish local factories to ensure affordability for the markets they serve."

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The world's largest market for automobiles, China has recently worked to encourage the development of a robust market for EVs. In September, Xin Guobin, the country's vice minister of industry and information technology, noted at a forum that the country is beginning to phase out sales of fossil fuel vehicles as it works to cut its carbon emissions, and that existing manufacturers will need to begin building more EVs in the coming years. As such, establishing a factory in China will be a major deal for Tesla as it works to ramp up its production around the world.

We've reached out to Tesla for comment, and will update this story if we hear back.