Tesla plans to start production in China

The Chinese government recently said it would lift the requirement that foreign manufacturers that wanted to build EVs in China had to work with state-owned partners

Reuters reported Wednesday that Tesla has signed an agreement with the Shanghai government for an 860,000-square meter plot of land for the new site, which represents a major step for Tesla's Chinese production strategy.

Those plans have gone ahead despite US-Chinese tensions over Beijing's technology policy.

The real estate transaction marks the first step for Tesla and its Chief Executive Elon Musk to build cars locally in China for the fast-growing market, even as tariffs imposed by Beijing on USA -made goods have caused Tesla to hike prices of its imported models.

China is the biggest global electric vehicle market and Tesla's second-largest after the United States.

At present, it appears that the vehicle made in this facility will be sold within the Chinese market, however, cheaper manufacturing costs in China would make sense for Tesla to further expand capacity and start exporting cars as well.

The company said it was accelerating the construction of the factory, and expected it to be capital-efficient with a rapid build out after learning "many lessons" from the launch of its Model 3 in North America.

[It is] An important milestone for what will be our next advanced, sustainably developed manufacturing site.

Tesla itself didn't disclose how much it paid for the land, but the Shanghai Bureau of Planning and Land Resources said the site was sold at auction for $140.5 million.

Analysts expect Tesla to report a loss of about 200 million dollars (£152 million) for the three months ending on September 30 after the previous quarter's 742.7 million dollar (£565 million) loss.

Tesla's foray into China is becoming a reality.

The company faces competition from Chinese brands including BYD Auto and BAIC Group that already sell tens of thousands of hybrid and pure-electric vehicles annually.

The California-based company was among the few Western automakers to stall its arrival in China until the country relaxed its foreign ownership requirements.

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