The plant will be located in a free trade zone but there will be a 25% import tariff from Beijing. Regardless of the tariff, the U.S company will still be able to trim production costs. The WSJ couldn’t tell when the new deal will be made public, while Tesla declined a request for comment.
This summer, the Palo Alto, Calif.-based car maker confirmed that it was negotiating with Shanghai authorities on building an assembly plant in the region. In June, Tesla said it remains “committed to the Chinese market,” and suggested that it was looking for other good manufacturing sites to produce for local markets.
China Has a Growing Interest in Electric Vehicles
Chinese authorities have rolled out a series of regulations that now force car makers to go electric. According to a new plan, auto makers in China will have to ensure that 10% the production is electric by 2019, In 2020, that number will climb to 12%.
Meanwhile, the U.S. government is heavily subsidizing electric vehicles. A government program has enabled more Tesla buyers to buy the Model 3. This year, the tax credit offered to EV buyers is $7.500 per car. Once Tesla has sold 200,000 cars, the federal money will be phased out.
So far, the electric vehicle maker has sold just 121,000 units, while production has jumped from 2,000 units five years ago to 80,000 last year. However, the tax credits don’t benefit buyers of luxury cars which can cost more than $140,000 at Tesla. Yet, $7,500 represents 20 percent of Model 3’ price tag, i.e. $35,000.
Image Source: Wikimedia