Tesla plans China plant with 500,000 vehicle capacity

Tesla Inc. is planning a factory in China with a capacity for 500,000 vehicles a year, according to people familiar with the matter, making its biggest push outside the U.S. to date.

Tesla is due to sign a memorandum of understanding with local entities in Shanghai, the people said, asking not to be identified as the information isn’t public. Chief Executive Officer Elon Musk was to be in the city for an event with the government on Tuesday, Bloomberg reported earlier. A Tesla representative in China didn’t immediately respond to a request for comment.

Tesla said a year ago it was working with the Shanghai government to explore local manufacturing. Since then, production in China has become even more compelling: Last week, in response to tariffs imposed by the U.S., China increased the import duty on U.S.-made cars to 40 percent, compared with 25 percent last year, prompting Tesla to raise prices. A plant in China also reduces shipping costs and potentially makes sourcing components more economical.

The company has boosted of Model S sedans and Model X crossovers in China by as much as $30,000 after Beijing imposed additional duties on American-built autos, putting its vehicles beyond the reach of more consumers in its No. 2 market globally. Bloomberg