Tesla reportedly made deal to open a manufacturing facility in Shanghai

Electric vehicle maker Tesla Inc reaffirmed on 22 October it is talking with the Shanghai municipal government to set up a factory in the region and expects to agree on a plan by the end of the year, but declined to comment on a report that a deal has been reached.

The company declined to comment on the report, Reuters said. Tesla has struck a deal to build a factory in Shanghai and not receive such a negative impact on its own profit.

The new factory could mean lower production costs for Tesla but not likely eliminate China's 25% import tax.

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 company had confirmed that it was talking to Shanghai's government about a factory at the same time.

The factory in Shanghai won't help Tesla gain control over the market, but instead it will help the company meet the demand in China, and hopefully make a bigger name for itself at the very cusp of the EV boom we are about to see in the area. But the move primes Tesla for a larger future slice of China's electric vehicle market, which is widely expected to be one of the world's largest in the coming decades and has attracted joint ventures from players like Ford, Renault-Nissan and Volkswagen. The Chinese government is aiming to sell seven million electric vehicles a year by 2025.

If a auto company wants to work in China, whether by building a factory or just making certain parts, it's expected of them to give up a lot.

Tesla is now working with the Shanghai government about details of the deal's announcement, such as timing, the report noted. Tesla is deeply committed to the Chinese market, and we continue to evaluate potential manufacturing sites around the globe to serve the local markets.

"As we've said before, we expect to more clearly define our plans for production in China by the end of the year".

Vanessa Coleman