Market Overview

Is Tesla Opening Manufacturing Facilities In China? Latest Round Of Rumors Says Yes

Is Tesla Opening Manufacturing Facilities In China? Latest Round Of Rumors Says Yes

Shares of Tesla Inc (NASDAQ: TSLA) were trading higher by more than 3 percent early Tuesday following unconfirmed reports the electric-car and solar-power maker is close to reaching an agreement with the Chinese government.

The agreement involves Tesla and the Chinese city of Shanghai building facilities inside the Lingang development zone, Bloomberg reported. As part of Chinese rules and regulations, Tesla would need to establish a joint venture with at least one Chinese firm before it could break ground on constructing new facilities.

Confirmation of an agreement is reportedly set to come as soon as this week, according to Bloomberg's sources. By producing cars in China, Tesla would avoid a 25 percent tax on its cars, which makes its Model S sedan and Model X SUV more expensive in China versus the U.S.

Also, Tesla could be attracted to the Chinese government's financial support for non-emissions autos. In fact, the Chinese government became the world's largest market for clean vehicles back in 2015.

This Time Is Different

Tesla executives reportedly visited the Suzhou region in China last year to discuss a manufacturing facility, the popular electric car news site Electrek reported. As such, reports of Tesla looking to open facilities in China is a rumor that has repeated itself in the past.

Tesla's CEO Elon Musk also said last year the company is looking to secure a location and a partner in China for a facility by the middle of the year, but an announcement was never made, Electrek added.

Nevertheless, the latest round of rumors comes at a different time for Tesla. For instance, Musk met last month with China's Vice Premier Wang Yang and prior to that China-based Tencent Holdings bought a 5 percent stake in Tesla.

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