Tesla’s China Dream Threatened by Standoff Over Shanghai Factory - http://ezmoneyonlinefromhome.com | how to make money online

February 14, 2018 5:15 am
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A Tesla Model S parked at one of the U.S. company’s electric charging stations in Beijing.

Tesla Inc., the biggest-selling electric carmaker in the U.S., is in danger of being relegated to an expensive niche in China because Elon Musk can’t clinch a deal to open a factory there.

More than seven months after Tesla said it was working with Shanghai’s government to explore assembling cars, an agreement hasn’t been finalized because the two sides disagree on the ownership structure for a proposed factory, according to people with direct knowledge of the situation. China’s central government says the plant must be a joint venture with local partners, while Tesla wants to own the factory completely, the people said, asking not to be identified because the negotiations are confidential. Currently, all foreign automakers must partner with Chinese companies in order to manufacture locally.

Tesla’s sluggishness in starting local manufacturing means it’s fumbling a chance to capitalize on China’s hard sell for new-energy vehicles, including EVs, plug-in hybrids and fuel-cell vehicles. President Xi Jinping’s administration wants to scrub notorious air pollution and reduce dependence on imported oil, and it’s doling out billions of dollars in subsidies to entice consumers away from gas guzzlers.

“It’s a market they need to get a foothold in,” said Jeffrey Osborne, a New York-based analyst for Cowen & Co.  with an underperform recommendation on Tesla.

Tesla declined to comment on its negotiations with the Chinese government over local production. The Ministry of Commerce, National Development and Reform Commission, and the Shanghai Economy and Information Commission—which are all involved in the deliberations—didn’t reply to questions faxed at their requests.

The disagreement doesn’t mean a deal won’t be reached in the future. Tesla currently sells cars in China, but an import tax of 25 percent catapults the sticker price beyond the means of most consumers. A Tesla Model X made in the U.S. and shipped to China costs about 835,000 yuan ($132,000), providing openings for cheaper models from domestic rivals such as BAIC Motor Corp., Warren Buffett-backed BYD Co. and startups NIO and Byton. 

A customer in Tesla’s Beijing showroom. The top-selling U.S. electric automaker risks being relegated to a luxury niche in China, the biggest market for electric vehicles. 

Photographer: Tomohiro Ohsumi/Bloomberg

Tesla said in June it was working with the Shanghai government to explore local manufacturing, and it expected to more clearly define production plans by the end of 2017. The company said it needed to have local factories “to ensure affordability for the markets they serve.”

In November, Musk said during an earnings call the company was about three years away from starting production in China—meaning 2020 at the earliest. “Don’t set your watch by this,” he said.  

Shares of local suppliers subsequently fell.

And the waiting game for Palo Alto, California-based Tesla may not end soon. Speaking with analysts after earnings were announced Feb. 7, Musk, the chief executive officer, didn’t talk about China, and the company didn’t mention its China plans in the update published with those results.


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