Tesla closing in on 1b yuan plot for China factory

Beijing

TESLA INC is in the process of procuring land in Shanghai for its first factory outside of the US, according to people with direct knowledge of the matter, pushing ahead with plans to set up production in China after months of tumult involving CEO Elon Musk.

The carmaker is the sole bidder for a plot of land with an auction price of about one billion yuan (S$199.5 million), the people said, asking not to be identified as the information isn't public. A decision by the Shanghai government to allocate the land to Tesla could be made as soon as this month, they said.

In July, Tesla reached a preliminary agreement with Shanghai authorities to build a factory that the electric-car pioneer has said will eventually produce 500,000 battery-powered vehicles annually, more than what its lone US assembly plant has made.

Setting up manufacturing in China will enable the Palo Alto, California-based company to avoid paying import duties as high as 40 per cent and offer cheaper cars in the world's biggest market for electric vehicles.

The Shanghai government didn't respond to a request for comment sent outside of normal business hours. Representatives for Tesla also didn't immediately comment. The company has said the China factory will augment existing production and that its US manufacturing operations won't be affected.

The progress on its China plans is a bright spot of news for Tesla, which has been pummelled in the stock market the past few months after Mr Musk's funding-secured tweeting scandal and the resulting fallout with U.S. regulators. The stock fell 2.3 per cent to US$256.88 Wednesday and is down 17 per cent this year.

The carmaker is considering raising some of the US$5 billion it intends to invest in the plant near Shanghai from local partners, Bloomberg News reported on Aug 1, citing a person familiar with the plans. Mr Musk told analysts on an earnings call later that day that he expected it would take about US$2 billion worth of investment for the factory to be able to produce around 250,000 vehicles a year. BLOOMBERG