A lot of car makers have set up shop in China in order to make use of their labour force as well as the cheap cost of manufacturing. This time, Tesla, on the other hand, has pulled off an amazing deal to build a factory in Shanghai which will be fully owned by Tesla. This makes it the first foreign-owned factory in China.
In order for this to happen, the factory sits in the free-trade zone. This comes as no surprise because China last year pushed for more electric car ownership as well as the number of electric vehicles manufactured. Why the change? Mostly because of the smog issue faced by many Chinese cities where pollution is mostly caused by vehicles. Having more electric vehicles on the road would definitely reduce the smog.
Even though Tesla cars will be manufactured in China, the 25% import tariff would still apply but where Tesla gains an advantage is a place to sell and deploy their cars in the Asian region. Tesla also gets to tap into China’s huge supply chain network. Strategically Tesla can be seen to be at the forefront of China’s electric car market whilst Chinese manufacturers catch up to sell cheaper versions. No one can definitely ignore the largest market in the world.