Tesla Registers New Business in the Shanghai Free Trade Zone, China
A few weeks after China announced foreign companies will no longer need to partner with local Chinese companies to manufacture cars in the country. This new Chinese policy applies first to manufacturers of electric cars. Tesla certainly qualifies on that score. Tesla created Tesla Shanghai Co. Ltd, a wholly owned subsidiary of Tesla HK.
The new company will focus on electric cars, spare parts, batteries, and solar photovoltaic products. The company is registered in the Shanghai Free Trade Zone. Zhu Xiaotong, who is the head of Tesla’s Chinese operations, is listed as the new firm’s legal representative.
Even though its Model S and Model X only account for 3% of the burgeoning electric car market in China — where they are subject to a 25% import duty (expected to be reduced to 15% according to the latest announcement of the Tariff Commission of the State Council from July, 2018) — sales in China are the second largest profit center for Tesla according to Quartz. This new business in China should give its sales a significant boost, especially with the Model 3 and Model Y on the way.
The next question will be whether China will permit Tesla to power its cars with batteries it makes itself (and with Panasonic) in the country or requires it to source batteries from a Chinese supplier like CATL, like Renault and Nissan will be doing. Chinese government has a “white list” policy for EV market. Battery companies in the list (mainly Chinese companies) receive considerable subsidies from the government. Also, foreign EV companies who purchase batteries from the companies listed would be prioritized in receiving the subsidies. To cut the costs and benefit from the policy, many foreign companies (like Renault and Nissan) choose to source batteries from Chinese companies like CATL.
China is committed to cultivating its own EV talents, bringing more job opportunities and improving the whole EV supply chain by opening to and attracting foreign powerful EV companies like Tesla. There are lots of details we don’t know and won’t know for some time. But as the Chinese proverb goes, “A journey of a 1000 mile begins with but a single step.” It appears Tesla’s Chinese odyssey has now officially begun.