With Tesla's sales in China growing, the company is working with the Shanghai government to "explore the possibility of establishing a manufacturing facility in the region to serve the Chinese market," Tesla said Tuesday in a statement.
Over the past week, media reported that the electric car maker has entered an agreement to build its own factory in Shanghai. But the company did not confirm the news in the statement, only reiterating that "we expect to more clearly define our plans for production in China by the end of the year."
The Shanghai government departments did not comment on the issue either.
Tesla said in the statement that it was "deeply committed to the Chinese market" and continues to look at opportunities to establish manufacturing sites worldwide to serve the local market.
While Tesla expects most of its production to remain in the United States, the company needs to "establish local factories to ensure affordability for the markets they serve."
On Monday, the American auto maker opened a massive 50-stall supercharger station in Shanghai Pudong New Area, which it claimed to be the company's largest supercharger station in the world.
Tesla's electric charging network already covers more than 170 cities in China. It has built over 700 superchargers in the country, and the number is expected to exceed 1,000 before 2018.
In mid-October, the company announced it would deliver its modified Model S and Model X vehicles to the Chinese market and ensure they meet national charging standards.
These moves are seen as support for China's new energy vehicle (NEV) industry.
As the world's largest car market, China is also the fastest-growing market for NEVs as the government looks to ease pressure on the environment.
Data from the Ministry of Industry and Information Technology showed production and sales of NEVs rose by 40.2 percent and 37.7 percent to 424,000 and 398,000, respectively, in the first nine months of this year, compared to the same period of last year.
Other global major auto makers including BMW, PSA Peugeot Citroen, Toyota and Mercedes-Benz have also stepped up their pace in exploring the NEV industry in recent years, eyeing emerging markets, especially China.
Construction of the Mercedes-Benz auto parts remanufacturing plant began earlier this month in Shanghai. The plant, focusing on auto component recycling in the Asia-Pacific, will become the only remanufacturing base that Daimler AG, Mercedes-Benz's parent company, has outside Europe.
SAIC-GM, a joint venture between China's SAIC Motor and General Motors of the United States, said it has defined a new energy strategic target. Each year between 2016 and 2020, it aims to roll out a "Made in China" NEV model in the country.
Julian Blissett, Executive Vice President of SAIC-GM, said the company is confident about exploring the green car market.
China has identified NEVs as a strategic industry. The country has even joined France and Britain in considering a timetable to ban production and sales of fossil fuel cars.
The huge consumption potential for NEVs has drawn foreign investment into the Chinese market, according to Bai Ming, a researcher with the Chinese Academy of International Trade and Economic Cooperation.
"The opening up of China's auto market benefits both foreign and domestic companies, as the former will have a new market to explore and the latter will be forced to weed out outdated concepts and technology," said Bai.