Tesla Motors Inc. is reported to have signed a non-binding agreement with Jinqiao Group to set up a production base in Shanghai. According to a Bloomberg report, the investment is worth $9 billion. Both Tesla and Jinqiao Group, a Shanghai-based state-owned company, will invest $4.5 billion (30 billion yuan) each. Jinqiao's share is likely to be in the form of land.

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While Tesla has refused to comment on the news, Jinqiao chose not to corroborate it. However, Tesla has been scouting for opportunities in China for quite some time. Several Tesla executives have allegedly visited different locations in the Suzhou region. They have allegedly also conducted talks with potential manufacturing collaborators.

Setting up a manufacturing base in China would help Tesla to avoid a 25 percent import tax levied by the Chinese government. China has emerged as the second biggest market for Tesla as the country accounted for the largest number Model 3 reservations after the United States. The company's Vice President of Asia-Pacific Ren Yuxian said that Tesla received a "flood of pre-orders" for Model 3 from China.  The country is also at the forefront of world automotive market.

Tesla has long expressed its interest in China. In October last year, the company CEO Elon Musk tweeted, "Model 3 is due in [approximately] 2 years. A China factory for local demand could be as soon as a year after."

As per the latest count, about 373,000 customers have pre-booked the Tesla Model 3. In its SEC filing, Tesla claimed that it "could further increase the number of Model 3 reservations with minimal effort."

TagsTesla, Model 3, Elon Musk, Jinqiao Group