Tesla is considering manufacturing electric cars in China in order to bypass a 25 percent tariff on vehicles imported into the country.
Tesla is considering manufacturing electric cars in China in order to bypass a 25 percent tariff on vehicles imported into the country.
The company announced Thursday that it expects to finalize production plans by the end of 2017, CNBC reports .
“While we expect most of our production to remain in the U. S., we need to establish local factories to ensure affordability for the markets they serve, ” the company’s statement said.
Moving production to China could cut sales prices for Tesla cars in the country by a third, Tesla owner Elon Musk claimed at a 2015 forum at Beijing’s Tsinghua University. The price cut could be achieved through saving on a combination of costs from tariffs and shipping.
China’s central government requires all foreign auto manufacturers to partner with a Chinese based company in order to build on Chinese soil, with the foreign company owning no more than 50 percent of the business.
However, both China and Tesla have much to gain from cooperating in the venture.
“China is willing to allow [Tesla] to plant its flag on Chinese soil, ” Bill Russo, auto consulting firm Gao Feng Advisory’s managing director, told the Wall Street Journal. “Tesla needs China. And China needs Tesla — it wants to show they’ re not a closed ecosystem.”
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