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Tesla Confirms Plans To Build Cars In China

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2014 Tesla Model S in China

2014 Tesla Model S in China

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Tesla Motors CEO Elon Musk has confirmed something we've expected for some time--the American electric car brand will build cars in China. That isn't in lieu of building them in the United States, but in addition to American production.

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Building cars in China offers several benefits over simply shipping them, not least respite from the country's heavy import duties. Speaking at a conference in Beijing to mark the start of Model S deliveries in the country, Musk told reporters that China is "very important" to Tesla, and expects to set up the mooted Chinese factory in the next three or four years.

It's likely Tesla Motors [NSDQ:TSLA] will pair with a Chinese automaker to avoid punitive duties in the country--a move other luxury automakers like Jaguar Land Rover, Mercedes-Benz and BMW have already made. The main benefit though is avoiding China's 25 percent import tax, which significantly adds to the cost of vehicles by the time they hit Chinese roads. When it goes on sale this week, an 85 kWh Model S will cost around $121,000--almost $50k more than it does in the U.S.

Despite the lofty price tag, that actually represents something of a bargain in China. Unlike many of Tesla's conventionally-powered competitors, Musk has refused to add a premium to the car's price, charging only what the car costs plus import and sales taxes, and shipping costs, to the car's Chinese price. Tesla's CEO has previously said he doesn't believe that ripping off customers "is a good long-term strategy".

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A factory won't be the extent of Tesla's involvement in China, though. Bloomberg reports that Tesla also plans a network of charging stations in the country. Not just Tesla's own Supercharger fast-charging network either, but general stations, presumably for use by other electric vehicles. Musk says that Tesla will make a "big investment" in China over the next few years--despite the difficulties many other automakers have faced in the electric-car skeptical market.

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