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Tesla has reportedly reached an agreement with Shanghai’s government to build a manufacturing facility in the city.

The Wall Street Journal broke the news, reporting that the automaker won’t form a partnership with a local company to build vehicles in the country, meaning it won’t be eligible to avoid China’s 25 per cent import tax. Nevertheless, local production will help to slash costs of Tesla models sold throughout China.

Neither Tesla or the Shanghai government have acknowledged the existence of such a deal but Elon Musk did reveal in June that the company was holding discussions with the government to secure local production.

As it stands, China requires car companies to establish joint-venture partnerships with local carmakers to build vehicles in the nation. However, China is discussing dropping this requirement for electric-vehicle businesses wishing to operate in its free-trade zones.

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