Tesla has preliminary deal for Tesla owned factory in China

Tesla has a preliminary deal with the Shanghai municipal government that will give Tesla ownership of a new Tesla factory in Shanghai’s free trade zone.

The preliminary deal still offers Tesla control over its trade secrets and may give the company leverage to negotiate better terms with the Chinese government in the future. Tesla hopes to complete the deal by the end of the year.

Tesla to build cars in Shanghai while still paying tariffs on them would be a coup for the Chinese government. If Tesla were making cars in the Shanghai area, it would have a powerful incentive to buy many, if not most, of the parts in China, strengthening China’s base of suppliers for the fast-growing electric car industry.

China already has the world’s largest market for electric cars.

LMC Automotive, a global consulting firm, estimates that 295,000 battery-electric cars will be sold this year in China, compared with 287,000 in the rest of the world combined. LMC predicts that China’s total will nearly triple in the next two years, while the rest of the world’s will merely double.

Chinese government regulations will require automakers starting in 2019 to sell ever-increasing numbers of electric cars and plug-in hybrids if they want to keep selling gasoline cars.

China is and will be the largest consumer and producer of electric vehicles in the world. Tesla has to compete in China.

China charges a tariff of 25 percent on imported cars, compared with 2.5 percent in the United States and 9.8 percent in the European Union. China also has a 17 percent value-added tax — a kind of sales tax — that is charged not only on the price of the car but also on the tariff, so that the taxes are effectively compounded.

48 thoughts on “Tesla has preliminary deal for Tesla owned factory in China”

  1. Even Porsche could not match Tesla in performance. Porsche Mission E 0 to 60 in 3.5 sec, Tesla P100D in 2.4seconds. Enough said.

    • Igor, you’re getting closer to Mars (I’m guessing that’s the cult’s heaven) by the day now. Keep up doing the lord’s (Elon of course) work!

  2. vlhcvlhc “$100k cars are more compelling than $25k cars, I’m shocked”
    There is clearly a market in China for 100K electric cars but China can not produce a single electric car in this price range to compete with TESLA. Clear enough for you why China is not competative with TESLA? In fact Chinese manufactures don’t even try cause they know they cant match TESLA’s quality, performance and Brand recognition.

  3. “US factories because they are lazy as hell.” Why do you say thing you have no idea about? Tesla workers are not pulling 12 hours shifts 6 day weeks. Nobody works harder then people who works for Elon. That in fact caused some fricktion with Unions and such. Not to mention that US workers in general are at the top of Productiviy in the world. As an example 6000 Spacex workers manage to launch more and develop more new tech than 200,000 Roscosmos workers.

  4. TESLA being the most revolutionary car has over 700 patents to its name. Just the battery pack has over 200 patents… It has a lot to protect and therefore chose to pay the 25% import tax so it does not have to share any tech secrets with China.

    • Igor, 700 patents is peanuts for the auto industry that has over half a million. Also you seem to not understand the difference between patents and trade secrets. You can’t “protect” patents, they’re by definition public (that’s why SpaceX doesn’t apply for patents). The only reason Tesla may be concerned about JVs in China is the potential loss of trade secrets.
      If you understand so little about business Igor, why do you think is wise to invest in the stock market? How is what you’re doing different from gambling?

      And by the way the big players chose to invest in China (in spite of potential trade secrets loss) because of the huge market is worth the risk (their sales are measured in millions of units, not thousands like Tesla’s).

  5. RBC, a Russian outlet, identified that account as one of 180 connected to a Russian troll farm intent on exploiting existing divisions and social movements in the United States, based on a major investigation into the operations of Russia’s Internet Research Agency. The protests against the Dakota Access Pipeline in Cannon Ball, North Dakota, were sacred for the Standing Rock Sioux Tribe.

    But for Russian trolls, the protests were another opportunity to sow discord in America — one of a series of social movements, from Black Lives Matter activism to pro-Trump populism, on which trolls appear to have seized.

  6. Alien dreadnoughts spreading all over the globe. When this fully automated Gigafactory is built it will be the most productive auto factory in the world.

    • Hope the alien Elon will hire for the chinese factory is not from the same planet as the ones he has in the US factories because they are lazy as hell.

  7. It’s a waste of money if you ask me. Tesla should stick to making their cars in the US.
    This factory, if it gets build (the Shanghai authorities haven’t confirmed it yet), will be in the free economic zone which means Tesla will still have to pay the 25% tariff to sell the cars in china. Which means Tesla doesn’t gain anything of value from this investment apart from the lower labor cost (although they probably need this since they’re the least productive car maker), and some PR.

    • I am sure Chinese will sweeten the deal in some other ways and even more so for the ones that come after this one.

      • I know Elon loves gov subsidies but don’t expect handouts from the Chinese gov, it would not be a popular move with the Chinese people. Can you imagine Trump subsidising a BYD? Lol

  8. Joe Wong is at the lowest layer of troll chierarchy, I call it a layered cake. The way the trolls operate on this site is like that. The most obvious and obnoxious trolls at the bottom layer provide “cover” so to speak to less obvious trolls at higher layers. The trolls from higher layers will often attack or criticize the bottom troll to gain legitimacy. Just watch this pattern of troll activity, it’s mildly intertaning. The cake is at least 5 or 6 layer thick…..

    • “China already has the world’s largest market for electric cars..” NBF said; “aren’t compelling consumer products” yet China is selling more EV than the USA and is the world leader in number of EV sold and technology, this contradiction is consistent with American Exceptionalism that calling bombing, killing and waterboarding on fabricated phantom WMD allegation is humanitarian intervention.

      There is nothing miracle in Tesla’s technology, double the amount of battery double the distance but triple the price. Besides Tesla does not make battery, it just claim credit where credit is not due.

    • $100k cars are more compelling than $25k cars, I’m shocked
      I don’t know about your, but when it comes to buying things, the price tag has a pretty big impact on how compelling I find the product
      Dunno, maybe that’s why China sells more electric cars than the rest of the world combined, that’s a lot of sales for uncompelling cars 🙂

  9. TESLA will thrive in the world’s largest auto market, according to one Wall Street firm.
    Piper Jaffray reiterated its overweight rating on Tesla shares, saying the company’s electric car quality is far ahead of its peers in China.
    “After meeting with an electric vehicle (EV) trade group this week in Beijing, we still think Tesla has little to fear from Chinese brands, at least based on the current competitive landscape,” analyst Alexander Potter wrote in a note to clients Tuesday. “Branding and performance are just as important, and in this regard, we think nobody (least of all Chinese OEMs) can compete with TSLA.”

    • The keyword is “”Branding and performance are just as important,” not technology, Alexander Potter surly knows a thing or two about the inferior American EV technology and he is using selective reporting to mislead the bigotry American investors.

      American has branded toxic cigarettes as women’s liberty; foreign technology iPhone as American innovation; bombing, killing and waterboarding on the fabricated phantom WMD as humanitarian intervention, Hollywood production as landing on the moon; people do not call American snakeoil salesman for no reason, but branding Tesla as symbol of performance is kind of blend and lack of imagination.

      • “Hollywood production as landing on the moon”
        That part makes you sound like you think the moon landings were faked.
        It will be very hard for me to take anything else you ever say seriously.

        • That part makes you sound like you think the moon landings were faked.
          It will be very hard for me to take anything else you ever say seriously.

          It’s a useful warning signal.

        • Telling truth is hate, while bombing, killing and waterboarding on the fabricated phantom WMD allegations is humanitarian intervention, defending human rights and installing democracy? It seems I am not main stream.

    • If you ignore cost, then how do you explain Tesla ranking YTD #15 and #16 in China?
      Does this mean mean it’s Tesla’s quality and performance that’s the issue? :O
      Irrational exuberance requires irrational logic.

  10. What’s not mentioned is China effectively requires electric cars to use Chinese batteries, effectively because subsidies are only given to carmakers who do, and it can be a lot.
    If Tesla keep using Panasonic cells the price different will be a lot higher than 25%
    And if they switch to, say, CATL, which is the most likely reason for the move, well that’ll be rather awkward for those who pretend Tesla have any battery technology themselves, won’t it 🙂

    • The “free trade zone” wasn’t established just for Tesla you know
      Choosing this route just means Chinese suppliers gets more business and Telsa still pays import tax, that’s heck of a deal

  11. Why are there the huge discrepancies in import tariffs? I am not American, but I feel there should be a “what’s good for the goose is good for the gander” kind off approach.

    • You think that if China dumps a certain amount of rocks in their harbors (making imports more expensive for consumers) then the US should dump the same amount in their harbors?

      • Rocks! The USA won’t stand for just rocks.
        No! They want to put minefields in the their harbours. And robot torpedo launchers. Extend the wall up both coasts.

    • If your goods brings nothing beneficial to the state and its people, of course you are not wanted and discouraged. On the other hand if you can bring something useful, then there are incentives to lure you. This is an universal rule on this planet, not even the American Exceptionalism can escape such rule. Obvious Tesla has nothing attractive to offer to Chinese but it wants to access Chinese huge EV market to make money. You should know there is no free lunch as the American said.

      • Why should USA accept to pay an import duty of 25% in order to export their products in China while China can sell in the US market almost for free at 2.5%? It seems Joe Wang has a strange idea of what is a universal rule is. Also because of the enormous trade surplus of Chine. In fact is China who is taking profit of the vast US market. It’s to renegotiate this stupid agreement and have Chinese pay.

        • The US buying public have votes, so they will not support someone who wants to add 25% to the price of cars just to support a few rich industrialists.
          However in China that isn’t a problem, for 2 reasons.
          1. General public don’t get a vote. The CCP doesn’t want them to get TOO upset, but whining about expensive cars isn’t a problem.
          2. Of the general public, only the limited numbers of upper middle class and rich are buying an imported car anyway.

          • @doctorpat, GM and VW are the biggest car companies and have biggest market share in China, don’t be ungrateful and sowing discord with fake news.

        • @Amarcord, most of the exports from China to USA are goods made in China by American companies like Apple, and most trade surplus is the profits of American business which do not want to pay American taxes. Donald Trump wants those American profits back to US tax free.

          US is notorious in tearing up treaties unilaterally for American First on the bases of fake news like “China can sell in the US market almost for free at 2.5%.” US regularly investigates China for unfair trade practices, but has never come up anything, besides there is WTO guarding free and fair international trade, American is the most frequent plaintiff.

          Japanese and the Korean are the real culprits destroying American jobs, they turned Detroit into inner city ghetto while not allowing American cars in their countries.

  12. “The preliminary deal still offers Tesla control over its trade secrets”

    I do hope Musk isn’t stupid enough to think China would actually honor that part of the deal. They’ll grab every secret they can, regardless of any agreement.

    • And what trade secret would Tesla have? With everything they do already done by BYD years ago, except batteries which Tesla is just a sticker on Panasonic cells.

        • Keeping something secret just make it confidential information, to be a trade secret it has to be not generally known or obtainable by others in the business
          What do you figure Tesla has that is not generally known by automakers? Axle level motors? The inverter? The Panasonic batteries? The laggy touchscreen? Lane following?
          Packaging existing technology in a different way can get you sales, but let’s not pretend there’s any trade secret there, ok?

          • If they did have trade secrets, they wouldn’t tell the public what they were now would they.
            So, we can’t say if they have any or not.

          • What DoctorPat says. That it’s a trade secret implies I *wouldn’t* know it.

            I’m a tooling engineer. Practically everything I do is a trade secret; Even when it’s something a competitor could figure out, you want to at least make them go to the effort.

            We’ve got a plant in Shanghai, most of our network security is aimed at making sure the data from our other plants can’t be accessed from there. We know any data that makes its way to that plant will be available to the Chinese government if it wants it.

            • It seems you are born with authoritarian mindset like Inland Revenue, ie. you are guilty until proven innocent, no wonder the Americans are crying foul mindedlessly.

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