Tesla Registers First Overseas EV Company in Shanghai

US carmaker Tesla Inc. is about to establish its first overseas electric-vehicle (EV) company in Shanghai, as China prepares to eliminate rules on limiting foreign ownership of domestic auto ventures.     

According to a filing released by China’s official business database, Tesla registered its new EV firm, 

Tesla Shanghai Co. Ltd., on May 10, with a capital of CN¥100 million ($15.8 million) and with its Hong Kong division recognized as the sole owner of the business.

The filing stated that Tesla Shanghai will focus on EVs, spare parts, batteries and the making of photovoltaic products.

Seeking to build up its position in China’s rapidly developing market for electric cars and avoid huge import tariffs, the Palo Alto-based corporation has been in long-drawn-out talks to construct its own factory in Shanghai to assemble its vehicles locally.

It was not confirmed however, if the new establishment was related to the expected Shanghai plant. 

Tesla chief executive Elon Musk said earlier this month that they were close to revealing their plans for the gigafactory.

A spokeswoman for Tesla said they do not have anything new to add on the registration for the time being.   

Tesla Operating Independently, China Lifts Auto-Ownership Limits  

The sole ownership could be indicating that Tesla intends to work alone in China, rather than with a partner.

Foreign auto manufacturers in China operate with domestic joint venture partners to avoid 25 percent tariffs on imported vehicles, but with EV-maker refusing to have one; it might just be putting its own technology at risk.

The company currently imports all of its cars for China from the US, subjecting them to a 25 percent tariff, which makes them more expensive than they are in the US and elsewhere.

Its other exclusively owned businesses registered in the country mainly focus on sales as well as research and development (R&D).

China stated that it will lift caps on foreign ownership of new-energy vehicle (NEV) ventures this year and all automotive businesses by 2022, marking a big policy change in the country that has restricted foreign ownership by 50 percent for more than 20 years.

Musk has expressed his disapproval with the country’s stiff auto regulations for foreign companies, describing the competition in China to uneven.     

Tesla, being an NEV maker, appears to be one of the major beneficiaries of the policy shift, according to analysts. The group has been firm about keeping control of its own plant and protecting its technology, rather than give up a 50 percent share.

China is vital to Tesla. Even though it only has a 3 percent share of the country’s market for battery-powered EVs, China is still the carmaker’s second-largest source of revenue.

The country currently surpasses the US in both new EV sales and overall stock of electric cars. China has also brought in sales of almost a quarter of a million EVs during the first quarter of the year.

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