Elon Musk's Tesla Inc. won't have to share profits or technology with the China, as the country has tweaked its local manufacturing norms exclusively for the electric car maker. Tesla is to decide on building its first automobile factory outside of the US in Shanghai, the Wall Street Journal reported on Sunday.
The newspaper reported that Tesla had reached an agreement to set up its own manufacturing facility in Shanghai. The Shanghai government will allow the Silicon Valley-based automaker to build a wholly owned factory in the city's free-trade zone, according to the newspaper.
A Tesla spokesman didn’t have a comment beyond reiterating the company’s previous statement in June that it planned to “clearly define” production plans in China by the year’s end, the report said. The Shanghai government didn’t reply to a request for comment, it said.
The move by the Chinese government is a major departure from its existing laws that require foreign firms to set up joint ventures with local firms. This far, all the major US automobile companies like GM and Ford will manufacture electric cars through their JVs. In August, GM's Chinese joint venture brand, Baojun, launched a two-seater electric car for around $5,300 after accounting for all the local green car incentives.
It is not immediately clear, however, if Tesla will be accorded the same import duty concessions that joint ventures with foreign partner involving technology transfers are given.
The move by Tesla comes at a time when the Indian government seemed keen to bring Elon Musk's venture to India. The government has already outlined its target of having an all-electric fleet on the roads by 2030. The intent to bring Tesla to India gained grounds after Prime Minister Narendra Modi visited the company's factory in Fremont, California, in 2015.
A year later, the Union Minister of Road Transport, Highways and Shipping Nitin Gadkari visited the Tesla factory near San Francisco and offered land and other incentives to make India their Asia manufacturing hub. The Indian government even offered land near major ports to facilitate export of their vehicles to South and South East Asian countries.
The lastest decision by Tesla to set up shop in China would imply that Musk may not look at another Asian manufacturing location soon and as it is, it did not officially respond to the earlier representations made by the Indian government.
The latest move by Tesla again outlines the nascent stage of the electric vehicles market in India compared to China, which is already the world's largest by number of battery-powered vehicles sold. A mandate by the government enforces that all car makers in China should sell a percentage of EVs from 2019.
In 2016, electric car sales in China stood at 329,000 units compared to 450 in India and according to a Bloomberg New Energy report, India had 350 charging points at the end of 2016, while China had 215,000 installed.
Last month, Gadkari didn't mince words when he extorted domestic auto firms to switch production to vehicles that run on non-polluting alternative fuels. Further, in the recently introduced Goods and SErvices Tax (GST), electric vehicles will attract only a 12% tax compared with 28% for hybrid, petrol and diesel vehicles. The government has also announced that it would bear up to 60% of the research and development cost for developing indigenous, low-cost electric technology from a specially set up corpus under the National Electric Mobility Mission Plan.
The government has set a target of having only electric vehicles on the road by 2030. Clearly, to achieve that target, a lot more needs to done.