Tesla gains approval to manufacture in China

Elon Musk’s courting pays off

The Chinese Ministry of Industry and Information Technology has added the American electric-vehicle maker Tesla Inc (TSLA) to a list of approved automotive manufacturers.

Elon Musk’s company will build a $2bn factory in the eastern Chinese city of Shanghai, its first manufacturing site overseas. This plan will be China’s first fully foreign-owned car plant.

This development will likely be welcomed by the White House. It has long sought an end to China’s Partnership Enterprise Law, which requires western companies to enter into a joint venture with Chinese firms as the price for doing business on the mainland.

CEO Elon Musk has made frequent visits to the country in the past 12 months in an effort to win support for the project. At a conference in August he appeared in conversation with Jack Ma, China’s richest man.

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Tesla hopes to manufacture at least 1,000 Model 3s a week from the Shanghai factory by the end of 2019. City authorities have already offered assistance to speed up construction, while on a national level Tesla cars have been exempted from a 10 per cent car purchase tax.

Tesla’s expansion into China comes at a time of both increasing import/export tariffs on US-made cars and increasing desire on behalf of China to reduce pollution. New regulations to reduce harmful emissions, requiring non-electric cars to have improved catalytic converters, will come into effect by the end of 2019.

Tesla stock is down almost $100 on the year to date, but increased and was performing well in pre-market trading following the announcement.

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