Tesla's bold move in China

Tesla and Shanghai's government have signed a “cooperative agreement” to build a Tesla manufacturing plant in the city’s Pudong district, according to a news release from Shanghai’s government. 

There are minimal details of the agreement but a Tesla spokesperson said the company still must “get all the necessary approvals and permits” to proceed. After that, car production could begin in about two years, with the full production of 500,000 vehicles a year to be reached four to five years from now. 

The vehicles will be primarily for the Chinese market.

"It will be a state-of-the-art vehicle factory and a role model for sustainability," Tesla CEO Elon Musk said in the statement.

"We hope it will be completed very soon. We’ve been impressed by the beauty and energy of Shanghai and we want our factory to add to that."

The preliminary agreement is a major development in Tesla’s nearly three-year effort to open China’s first production facility.

Unlike other foreign car manufacturers that have set up plants in China, Tesla will be the sole owner of the new production facility. In the past, outside car companies were required to partner with local Chinese companies. 

In November 2015, Musk said Tesla was about three years away from starting production in the world’s biggest car market. At the time, he suggested the plant would supply China and potentially other parts of Asia with a couple hundred thousand vehicles a year - less than half of the new goal.

China’s fast-growing market for new-energy vehicles presents a massive opportunity for Tesla.

In China battery-powered, plug-in hybrid and fuel-cell vehicles reached 777,000 units last year and could surpass 1 million sales in 2018, according to the China Association of Automobile Manufacturers. The government’s target is 7 million vehicles a year by 2025.

Featured image: Elon Musk at the official signing and announcement of the agreement. Source: Shanghai Municipal People's Government