Tesla, Inc. (NASDAQ: TSLA) is close to a deal to produce vehicles in China with local automaker, according to Bloomberg News.
The report said Tesla will build its first factory in Lingang development zone in Shanghai, China. This will be Tesla’s first assembly plant outside the United States. The report also said the details are being finalized and the timing of the announcement could change, but it could come as soon as this week.
To start vehicle production in China, the eclectic car maker need to partner with at least one local partner using a joint venture. It is still unclear which company Tesla will work with.
Tesla share rose nearly 2 percent in the early trading in New York. But it erased its gains after that. The stock had gained more than 70 percent year-to-date.
By setting up the local production, Tesla is able to continue its massive growth in China. Demand for new-energy vehicles in China is growing rapidly, as the government aims to clean up the environmental pollution. Revenue of Tesla in China jumped to more than $1 billion in 2016. By producing and assemble the cars in China, Tesla can avoid a 25 percent tax and make its cars affordable to more people.
Earlier this year, China’s tech giant Tencent Holding Ltd had disclosed a 5 percent stake in Tesla for $1.8 billion. Tencent is the owner of WeChat, a messaging app that induces communication, social media, entertainment and payment service.