Tesla Near Deal for Factory in China

Tesla Inc. may announce as early as this week an agreement to build a factory to make electric cars in Shanghai, sources tell Bloomberg News.

Local production would enable Tesla to avoid the 25% import duty that drives up the China retail price of its $97,500 Model S electric sedan to more than $121,000.

The deal would require the company to partner with a Chinese company. It isn’t clear who that might be, Bloomberg says.

Tesla’s revenue in China tripled to $1.1 billion in 2016. But capitalizing on the government’s push to boost sales of EVs will require Tesla to establish local assembly in China. That will be especially important for the company’s first high-volume vehicle, the $35,000 Model 3 sedan, expected to begin production in the U.S. in July.

EV sales in China, already the world’s largest market for such vehicles, reached about 352,000 units last year. Tesla’s sales there tripled to about 9,000 units in 2016.