American electric carmaker Tesla is seeking local partner in China, and is reportedly close to reaching an agreement to produce vehicles in China for the first time, reports Bloomberg.
The agreement reportedly being worked out with municipal authorities in Shanghai will enable Tesla to build factory in Lingang Development Zone. Under Chinese regulations, Tesla needs to cooperate with at least one local partner to set up joint venture.
Elon Musk, CEO Tesla, Inc., said that setting up a factory is a crucial step for gaining access to the Chinese market. Tesla's revenues in the Chinese market doubled in 2016, reaching over USD 1 billion.
Locally produced vehicles can avoid the 25% import tax which currently makes Tesla's Model S sedans and Model X sport utility vehicles much more expensive in China than in the U.S.
Chinese authorities have made new-energy vehicles a priority, classifying them as a strategic emerging industry, with hopes of increasing sales of hybrid vehicles and fully electric cars 10-fold in the next decade.
China surpassed the United States to become the largest non-emission auto market in 2015.
Chinese internet firm Tencent Group bought a 5% stake in Tesla for USD 1.8 billion in March, 2017.