Tesla plans to build its own factory in Shanghai's free-trade zone, allowing it to bypass a joint venture that is typically utilized by automakers in China, according to the New York Times.
Tesla will be able to guard its trade secrets in the free-trade zone, but must pay a tariff likely around 25 percent, if the automaker isn't given special treatment. Tesla has struck a preliminary deal with the Shanghai municipal government, the report said.
Though exact terms of the deal aren't clear yet, Tesla is said to be planning to get the factory deal finalized by the end of the year. This echoes a previous statement from Tesla that it will reveal more about its China manufacturing plans by the end of the year.
Tesla said in June:
Tesla is deeply committed to the Chinese market, and we continue to evaluate potential manufacturing sites around the globe to serve the local markets. While we expect most of our production to remain in the US, we do need to establish local factories to ensure affordability for the markets they serve.
It's not clear what the plant's manufacturing capabilities will be, or what price difference the Model S and Model X will see in China as result of the tariff and local manufacturing. It was also previously reported in June that Tesla was looking at Shanghai and Guangdong for a plant to expand in China.
Tesla has seen a boom in China sales over the past year, seeing revenue triple to $1 billion in the country. In May, China's Tencent Holdings bought a 5 percent stake in Tesla for $1.78 billion and could help Tesla gain a stronger foothold in the country.
Tesla is currently producing cars at its assembly plant in Fremont, California, that was purchased from Toyota in 2010.
We have reached out to Tesla in hopes of learning more about its plans in China.