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Tesla may take a different route than other carmakers in China

Tesla is set to start manufacturing in China and it might be a trailblazer on the way of foreign firms creating a fully owned production cycle in the country, which would be a new relationship between an overseas carmaker and the government of China.

Foreign car manufacturers willing to work in China are limited in the choice of production models by the country’s government. One of the choices is a joint company that implies sharing a big part of the technology and income with a co-owner from China. An alternative choice is to produce in one of free-trade zones of China, letting retain the tech but requiring stumping up high tariffs.

As a rule car producers opt for a joint venture. Tesla’s willingness to take a different route shows that China is aiming to take the lead in the global market of electric cars.There’s a precursory agreement between the firm and the municipal government of Shanghai that Tesla would own its facility, as was said by people close to the negotiations on Sunday.

Tesla would become the resident of a free-trade zone, said these people preferring to stay anonymous because they were not given the authority to speak on the negotiations. Cars produced in a free-trade zone would fall under high tariffs of China, as if they were imported from other countries though they were manufactured within China, which could change only in case Tesla is able to negotiate an exemption.

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