A Tesla Model X electric car is on display at a Tesla dealership in Shanghai, January 17, 2017. [File photo: IC]
US electric car manufacturer Tesla has reached a preliminary deal with the Shanghai Municipal Government to set up a new vehicle factory in the city, reports The New York Times.
This will make Tesla the first foreign car maker to have a wholly-owned manufacturing facility in China.
Tesla plans to set up its manufacturing operation in the Lingang Economic Development Zone, which is located in the Pilot Free Trade Zone in Shanghai.
The New York Times is reporting the auto maker will be able to cut its production costs and gain a larger share of the fast-growing electric vehicle market in China.
China is currently the world's largest new energy vehicle market.
A source close to the agreement says Tesla hopes to complete the deal by the end of this year.