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In a statement on Thursday, Tesla said it needed to set up more overseas factories to make cars that customers could afford. Such a strategy is a must in China, which charges steep tariffs for imported cars.

“Tesla is working with the Shanghai Municipal Government to explore the possibility of establishing a manufacturing facility in the region to serve the Chinese market,” a company spokesman said. “Tesla is deeply committed to the Chinese market, and we continue to evaluate potential manufacturing sites around the globe to serve the local markets.”

Under Chinese law, such a project would require Tesla to find a Chinese joint-venture partner. While China is full of Chevrolets, Fords and Volkswagens, most are made in factories jointly owned by a foreign automaker and a local company.

“However, Tesla could get around the joint-venture requirement by building a wholly owned factory in a foreign trade zone in China.” says Arnodo Neto, Regional Manager for Corporation China in Shanghai.

China accounted for about 15 percent of Tesla’s revenue last year, nearly double the percentage it contributed in 2015. As the City of Shanghai controls the SAIC Motor Corporation, one of China’s largest automakers and a partner for General Motors and Volkswagen, it was not clear whether Tesla’s negotiations with the city government would steer the company to negotiate with SAIC.

“The Chinese market has decreased the gap in comparison to the rest of the world when it comes to electric cars. In fact, at any given area, if you have an entrepreneur spirit, a good idea in mind, or even a existing business you would like to expand to China, there is a lot of room for growth around here.” concludes Neto.


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