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Tesla hits pause on China factory over joint-venture rules

Tesla doesn\'t want to play by China\'s rules.

A spat between Tesla and the Chinese government over ownership of a proposed factory is jeopardizing the electric automaker's foothold in the world's largest plug-in market, a new report finds.

It's been seven months since Tesla started negotiations with the Shanghai government to open a factory there, but little headway has been made on the subject since. Insiders say that's due to a rift between Tesla and Chinese authorities over a law that requires foreign automakers to jointly run any new plants with a local partner; Tesla wants to maintain full control of its proposed production facility.

Tesla desperately needs local production in China in order to capitalize on the country's growing demand for electric vehicles. Without a Chinese factory, all Tesla vehicles sold in the country are subject to a 25 percent import tax. As a result, Tesla is quickly falling behind its Chinese rivals.

While Tesla was the leading EV seller in the U.S. with around 55,000 sales last year, the company only delivered 14,883 units in China in 2017, ranking 10th overall. Meanwhile, Beijing Electric Vehicle Co. led the segment with more than 100,000 sales of battery-powered vehicles.

That disparity is at least partially due to price. China's most popular electric vehicles sell for between 130,000 yuan and 448,000 yuan, while a Tesla Model X retails for 835,000 yuan. A local factory would go a long way in lowering Tesla's prices.

"It's a market they need to get a foothold in,” Jeffrey Osborne, a New York-based analyst for Cowen & Co., told Bloomberg.

Tesla previously stated that it would give an update on its China plans by the end of 2017, but the company's year-end report made no mention of the world's largest auto market.

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