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Tesla makes Chinese solo play

Render of Tesla's Nevada Gigafactory

Tesla has established a new company in Shanghai, a move towards a Chinese Gigafactory

US electric vehicle icon Tesla has registered an electric car firm in Shanghai.

Since China announced that it would be scrapping regulations preventing foreign car makers from operating in the country without a Chinese partner, the industry has been waiting for Tesla to make its move on the lucrative Chinese EV market, the biggest in the world.

On May 10, Tesla registered Tesla (Shanghai) Co. Ltd in a filing with China’s National Enterprise Credit Information Publicity System.

There were previous rumblings of them working with a partner, such as Panasonic. However, this new company is likely to be only one part of Tesla’s Chinese strategy, and may not preclude cooperation with other companies.

Tesla’s Chinese subsidiary will focus on electric cars, spare parts and batteries.

It was registered by Tesla’s Hong Kong subsidiary and approved by the Shanghai Pudong New Area Market Supervision board. They described the scope of the business in the filing: “Technical development, technical services, technical consultation, technology transfer in the field of electric vehicles and spare parts, batteries, energy storage equipment, photovoltaic products, wholesale and commission agency (excluding auctions) and import and export business of the above-mentioned similar products, And provide related supporting services, electric car display and product promotion.”

The new company will be established in Shanghai’s free-trade zone, which has favourable rules compared to the rest of the country, removing a number of the financial requirements imposed on establishing a company in China, along with simplifying the procedures.

The new company will have a working capital of 100 million yuan (US$15 million) to start with.

Whilst this is not the first subsidiary Tesla has in China, it is the first that will focus on production. Tesla currently has wholly-owned firms in the country focused on sales and research.

Since the 50/50 ownership structure was a tar pit between Tesla and China, it was only a matter of time before Tesla started to establish a subsidiary in China. Tesla had been hoping to build a factory in Shanghai, as being able to produce its vehicles locally would help it take a bigger slice of the market, as well as avoiding high tariffs placed on imported vehicles.

Also, given China’s bad reputation for industrial espionage, Tesla may be wary about giving a Chinese partner too much access to its technology.

It is currently unclear whether this new company will be involved in the proposed Shanghai Gigafactory, although it is unlikely that Tesla will have given up on this dream altogether, especially with an open road ahead of it.

Still, there are bumps ahead, as a trade-war between the US and China still looms over the world’s two largest economies. However, in a surprising move, US President Donald Trump has pledged to work with Chinese President Xi Jinping to save telecoms giant ZTE, which is suffering after the US banned American companies from selling it components.

Whether this is a sign of reconciliation between the two superpowers, or simply an act of Trump-brand unpredictability, remains to be seen.

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