Caixin
Feb 06, 2017 06:48 PM
BUSINESS & TECH

Leaked Document Reignites Tesla Shanghai Factory Talk

(Beijing) — Plans for a multibillion-dollar electric-car joint venture backed by U.S. manufacturer Tesla Inc. are moving ahead in Shanghai, with the city’s Lingang port area as the leading local candidate, a knowledgeable source told Caixin on Monday.

After stumbling in China following its entry to the market in 2014, Tesla has taken a number of steps to improve its performance to take advantage of Beijing’s drive to boost clean-energy vehicles. A chief plank of that drive has been plans to localize production, which Tesla founder Elon Musk previously said he hoped to do by 2018.

Tesla “still hasn’t made a final decision, but the possibility (of a production base) in Lingang is the strongest,” the source close to the Shanghai government told Caixin, speaking on condition of anonymity due to the sensitivity of the situation.

The source didn’t elaborate on the stage of discussions, or even if such talks were even currently active. It was also unclear if any talks were exclusive to Shanghai, or if other cities were still courting Tesla. Reports last year had said a number of other cities — including Suzhou, Hefei and Guangzhou — were also interested in hosting such a project.

Another auto industry source confirmed that Tesla has been in continual talks with several local governments, and that all were competing fiercely to receive the prize investment.

Plans for the factory, reportedly costing about $9 billion, regularly made headlines in China in 2016. At one point in June, reports emerged saying Tesla had signed a memorandum of understanding with Shanghai’s Jinqiao Group to build a 50-50 joint venture in the city’s Pudong New Area. But no deal was ever announced, and reports of the plan disappeared in the second half of the year.

Discussion of the project resurfaced this week after a screenshot of a related document appeared on the internet. That document detailed a 50-50 joint venture to be located in Lingang, with an annual capacity of 500,000 vehicles.

The document showed that Tesla would form the venture with up to three local partners, some or all with strong government ties. Such a model would be similar to one used by the Walt Disney Co., whose $5.5 billion Shanghai Disney Resort is also a joint venture including a partner with strong local government ties.

Tesla’s China office later said news reports based on the online document were false. “Tesla is deeply committed to the Chinese market, and the rumors that are circulating are untrue,” the company said.

Last month, Tesla’s Asia chief, Ren Yuxiang, said at a Beijing event that the company has always wanted to set down real roots in China and become a “China Tesla” rather than just “Tesla China.” He added that Tesla was planning to open a China-based research and development center.

UPDATE: This story updates an earlier version to include Tesla’s detailed denial of news reports that the company is planning a joint venture in Lingang with multiple partners.

Contact reporter Yang Ge (geyang@caixin.com)

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