City offers robust supplier network, deep talent base: analyst
Shanghai Jinqiao Export Processing Zone Development Co on Tuesday denied that its controlling shareholder had signed any agreements with U.S. premium electric-car maker Tesla Motors Inc concerning the latter's local production, according to a filing on the Shanghai Stock Exchange.
Earlier on Tuesday, Bloomberg reported that Jinqiao Group, the controlling shareholder, had signed a nonbinding memorandum of understanding with Tesla on building production facilities in Shanghai.
According to the report, each party will invest about 30 billion yuan ($4.57 billion) in the partnership,?with Jinqiao putting up land for most of its share.
Following the news, shares in Shanghai Jinqiao Export Processing Zone Development- Co surged 9.98 percent in morning trading on Tuesday. Trading was suspended in the afternoon session.
Media reports in January said that Elon Musk, founder and CEO of Tesla, was considering the construction of a production base in China. Later media reports showed that Suzhou in East China's Jiangsu Province and Hefei, capital of East China's Anhui Province, had wooed Tesla, but neither of the locations was confirmed by Tesla.
Tesla did not comment when asked by the Global Times on Tuesday whether it would build a production facility in Shanghai.
Tesla has previously cooperated with Jinqiao. In April 2014, Tesla opened a supercharger station in the Shanghai Jinqiao Economic and Technological Development Zone, which is operated by Jinqiao Group, and a Tesla experience center is also located in the zone.
Zhang Yu, managing director at consultancy Automotive Foresight (Shanghai) Co, said that Shanghai would be an attractive location for Tesla's local production, given the area has a very mature auto supplier network and a rich industry talent pool.
Shanghai is home to SAIC Motor Corp, which has joint ventures with General Motors Co and Volkswagen AG.
Though Tesla is pinning high hopes on China, its performance in the market hasn't met expectations. In 2015, revenues from China totaled $319 million, down 33 percent on a yearly basis, according to its annual report in February.
Local production could help boost sales by significantly lowering costs, analysts said. Importing vehicles means paying shipping fees, and the cars are then subject to a 25 percent duty.
A basic Model S is priced at about 680,000 yuan ($103,360) in China, compared with some $72,700 in the U.S., according to price information online.
The Chinese government has been encouraging sales of new-energy vehicles (NEV) throughout the country, and NEV buyers enjoy subsidies or favorable policies in getting a car plate in some locations.
Analysts also said that it is better for Tesla to start local production sooner rather than later as the market is evolving fast.
"It could take years for Tesla to finally start production in China, but it may face fiercer competition by then, as both Internet companies and traditional carmakers have their eyes on the electric vehicle market," Shanghai-based independent analyst Wu Shuocheng told the Global Times Tuesday.
For instance, Internet company Letv Holdings Co has announced plans to produce electric cars, eyeing Tesla as a rival. Harmony Futeng, a start-up backed by Internet giant Tencent Holdings, is also eyeing electric cars.
