Tesla has reportedly signed a preliminary agreement with the city of Shanghai to build its next Gigafactory there, according to a report from Bloomberg.
The deal would allow Tesla to begin construction of its facility near an industrial development zone in the outskirts of the Chinese megalopolis.
This would be a big move for the Californian car maker, which tripled its earnings in the country to more than $1 billion (£790m) last year.
The move would also help the company to bring down production costs, Bloomberg reports, a crucial requirement for Tesla’s mass market expansion strategy.
The company has produced “roughly 80,000 cars” in 2016, the report says, but the company’s plan is to scale up that number significantly by 2018, with a huge seven-fold increase to 500,000 electric vehicles (EVs) – including, of course, its forthcoming Model 3 sedan.
Currently, according to TechCrunch, Tesla’s Model S and Model X EVs both ship to consumers in China with a 25% import tax. Manufacturing locally would help the firm circumvent that, and thus expand its business to more affordable segments of the market.
Back in March Chinese company Tencent – best known for the mobile app WeChat – invested $1.78 billion (£1.4 billion) in Tesla, a move that could further help Tesla in growing its China-based operations.