Tesla Revs Closer to China Mega-Plant

Electric car giant Tesla Inc. expects to finalize stalled plans for a China manufacturing plant “soon,” as its founder signaled the venture was likely to be a wholly-owned venture under relaxed rules for foreign participation in China’s car industry.

Word about Tesla’s plans to build only its second plant worldwide began to emerge two years ago, and the company has since confirmed its intent. But no final announcement has ever come, in part because the company reportedly would like to wholly own any car-making venture it sets up in China.

Current rules limit foreign ownership of such ventures to 50%, but that limit will be scrapped completely for electric-car makers like Tesla by the end of this year, the nation’s economic planner announced last month. Limits will be eased more gradually for traditional gas-powered cars, with complete foreign ownership allowed by 2022.

“(W)e also expect to announce the location of the Tesla Gigafactory in China soon,” founder Elon Musk said on Thursday in a conference call to discuss his company’s latest financial results, later clarifying that the factory would produce both batteries and cars.

“We’re very appreciative of the fact that the government of China has announced that they will be allowing full ownership of manufacturing facilities in China,” he said, according to a transcript of the call. “I would just like to express an order of appreciation to the Chinese government in that regard. … (We’ll) we'll have a lot more to say about that in the future.”

In a post on his official Twitter account last month before a timetable for the easing of ownership restrictions was announced, Musk had criticized China both for the foreign ownership limits and also for China’s 25% tariff on imported cars, a high level compared with 2.5% in the U.S. China has announced it will also reduce import tariffs on cars, but has not yet rolled out specifics.

China is the world’s largest car market, drawing most of top foreign automakers to set up joint ventures there. But some complain that such ventures force them to transfer technology that can be used by their Chinese partners, and also that their inability to own majority stakes deprives them of control of those operations.

At the same time, the country is also making a big push into new-energy vehicles, in a bid to clean up the country’s air. China is already the world’s largest market for such vehicles, thanks to strong incentives from Beijing and also a new policy that will require all automakers to sell specific quotas of such cleaner-burning vehicles as a percentage of their total sales starting next year.

Contact reporter Yang Ge (geyang@caixin.com)