Tesla sets its sights on China

Tesla will build electric cars in China in the next three to four years, giving Tesla a foothold in an ever-growing market – and helping the automaker avoid China's hefty 25 percent import tariff.

We've expected it for some time, but now it's been confirmed: Tesla will build electric cars in China in the next three to four years.

While Chinese production won't replace the company's facilities in the U.S, it will give Tesla a foothold in an ever-growing market--and help it avoid China's hefty 25 percent import tariff.

According to Bloomberg, Tesla's plans also include building a network of battery charging stations in the country--both Tesla's dedicated Supercharger stations and others too.

Tesla CEO Elon Musk described China as "very important" to the future of the company, speaking at a conference in Beijing.

He said Tesla will make a "big investment" in the country in terms of charging infrastructure, but also expects to make cars in China in the next three to four years.

The move is likely to involve a joint-venture with a Chinese automaker to avoid punitive duties--just as Audi, BMW, Mercedes, Jaguar-Land Rover and several other automakers do (or plan to do) to avoid the country's heavy tax penalties.

Sales of the Model S electric sedan will begin in China next week. Tesla is applying an unusual pricing strategy in the country, refusing to charge more than the car's U.S. price plus import and sales taxes, and shipping costs--unlike many other automakers, who often add a premium.

Musk believes it's important that Tesla offers its customers good value for money. "I don't think ripping off customers is a good long-term strategy," he told Bloomberg back in January.

The car's $121,000 Chinese price tag will actually make the car a great deal moreaffordable than many conventionally-fueled rivals--likely making China one of Tesla's biggest markets.

Despite Tesla's confidence, the company is still unlikely to have it easy.

Electric cars have been a hard sell in China so far, with only 17,600 plug-in vehicles in total finding homes there last year.

Incentives are relatively high, but the high price of electric vehicles is still dissuading many customers. Charging infrastructure is also an issue, in a country where millions live in high-rise city dwellings with no easy access to charging facilities.

Musk is hoping the Model S will qualify for Chinese subsidies, though its higher market segment means price and charging access may not be as much of an issue as it is for lower-end vehicles.

Either way, Chinese production and Tesla's efforts to improve charging infrastructure should both play in the company's favor. The next few years could be interesting ones indeed for Tesla.