Tesla announces deal for Shanghai factory

Electric car producer Tesla will build its first factory outside the United States in Shanghai under an agreement signed Tuesday, becoming the first wholly foreign-owned automaker in China.

Tesla Inc's announcement comes amid mounting US-Chinese tension over technology and follows Beijing's April promise to end restrictions that required foreign automakers to work through local partners.

Tesla said construction would begin in the near future, once official permits are obtained. It said production would begin two to three years after that and eventually increase to 500,000 vehicles annually.

No financial details were announced. A city government statement said the factory would be the biggest foreign investment to date in Shanghai, a base for joint ventures between General Motors Company and Volkswagen AG and a state-owned automaker.

The signing ceremony was attended by Tesla Chairman Elon Musk, Mayor Ying Yong and other Chinese officials, according to the city government.

China is the world's biggest electric vehicle market but Tesla and other producers including GM and Nissan Motor Company had been reluctant to transfer manufacturing to this country due to the requirement to share technology with Chinese partners that might become rivals.

Tesla began selling cars in China in 2014, shipping them from its California factory, which added a 15 per cent import duty to the price. Despite that, China quickly became its No. 2 market after the United States.

"Tesla is deeply committed to the Chinese market," the company said in a statement.

Tesla is among companies hit by additional 25 per cent import duties imposed by Beijing in retaliation for a tariff hike by the US in a dispute over technology policy.

Tesla said it also would set up a research and development facility in Shanghai.

The company said the China factory would not affect production in the United States, which is forecast to increase.

AP