American electric car maker Tesla Motors is planning to invest close to 59.1 billion yuan ($9 billion) to set up a manufacturing base in Shanghai city, a person familiar with the matter said.

An anonymous source said that Chinese construction company Jinqiao Group has signed a non-binding memorandum of understanding (MOU) with Tesla Motors to construct an assembly plant in Shanghai city.

Like Us on Facebook

However, Shanghai Jinqiao Export Processing Zone Development Co - a publicly traded unit of Jinqiao Group - said it has not signed any MOU with Telsa. Telsa Motors has also not confirmed the agreement.

Khobi Brooklyn, a Tesla spokeswoman, said the company won't comment on "rumor and speculation."          

But unconfirmed reports suggest that negotiations are already in process between the two companies. Reports indicate that both parties will invest nearly 30 billion yuan ($4.5 billion) in the joint venture, with Jinqiao's investment comprising mostly land.   

Setting up a manufacturing base in Shanghai would give Tesla Motors an exemption on import levy tax, which would help Tesla's electric motor vehicles to become more cost effective against luxury-brand rivals such as BMW and Audi. It would also help the company to compete with electric cars offered by homegrown Chinese companies like BYD Co and BAIC Motor Corp.

The decision would also help Tesla to expand its market share in China. Currently, most of Tesla's customers are affluent. China is the biggest market for Tesla after the U.S, and therefore the country assumes immense importance for company's future growth. 

Tagstesla motors, china, Tesla China, Jinqiao Group, Shanghai