Shanghai Said to Be FrontRunner for Tesla China Production Site

Tesla gigafactory in Nevada. 

Shanghai Said to Be Front-Runner for Tesla China Production Site

Manufacturing in China would allow the company to avoid a 25% import levy, making its electric vehicles more competitive against luxury-brand rivals, such as BMW and Audi, as well as local offerings by BYD Co. and BAIC Motor Corp. 

In an investment that may be valued at about $9 billion, Shanghai has emerged as the front-runner to become the production base for Tesla Motors Inc. in China , according to a person with knowledge of the matter.

Jinqiao Group, a Shanghai government-owned company, has signed a non-binding memorandum of understanding with Tesla on building its production facilities in the municipality, said the person, who asked not to be identified because the negotiations are private. Each party may invest about 30 billion yuan ($4.5 billion) in the partnership, with Jinqiao putting up land for most of its share, the person said.

Khobi Brooklyn, a Tesla spokeswoman, said the company wouldn’t comment on “rumor and speculation.”

Calls to Jinqiao Group weren’t answered, while the Shanghai Jinqiao Economic and Technological Development Zone, a government body overseeing the area, didn’t immediately respond to a faxed request for comment. A spokeswoman for the Shanghai municipal government didn’t confirm or deny the negotiations, saying checks with related parties didn’t yield much clarity.

Manufacturing in China would allow Palo Alto, Calif.-based Tesla to avoid a 25% import levy, making its electric vehicles more competitive against luxury-brand rivals, such as BMW and Audi, as well as local offerings by BYD Co. and BAIC Motor Corp. Tesla Chief Executive Officer Elon Musk said in January that the automaker is seeking a Chinese production partner and has held “a number of high-level meetings” with the government.

Besides Shanghai, Suzhou and Hefei are among the cities that are actively seeking to win the investment from Tesla, the person said.

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