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Input: (Reuters) - Electric car maker Tesla Inc (TSLA.O) reaffirmed on Sunday  it  is talking with the Shanghai municipal government to set up a factory in the region and expects to agree on a plan by the end of the year  but declined to comment on a report that a deal has been reached.
FILE PHOTO:  Tesla Model 3 cars  are seen as Tesla holds an event at the factory handing over  its  first 30 Model 3 vehicles to employee buyers at the company’s Fremont facility in California  U.S. on July 28  2017. Courtesy Tesla/Handout via REUTERS
China levies a 25 percent duty on sales of imported vehicles and has not allowed foreign automakers to establish wholly owned factories in the country  the world’s largest auto market. Those are problems for  Tesla   which wants to expand  its  presence in China’s growing electric vehicle market without compromising  its  independence or intellectual property.
 Tesla  would still have to pay a 25 percent duty on cars built in a free trade zone  but  it  could lower  its  production costs.
 Tesla  on Sunday pointed to a statement  it  made in June that the company “is working with the Shanghai Municipal Government to explore the possibility of establishing a manufacturing facility in the region to serve the Chinese market. As we’ve said before  we expect to more clearly define our plans for production in China by the end of the year.”
A  Tesla  spokesperson in the United States declined to comment further beyond referring to the June statement.
The Wall Street Journal reported that  Tesla  and the Shanghai government have reached a deal in that city’s free trade zone. Shanghai is China’s de facto automotive capital and a significant market for luxury vehicles of all kinds.
Chinese internet company Tencent Holdings Ltd(0700.HK) has a five percent stake in  Tesla  and is seen as a potential ally for  Tesla ’s efforts to enter the Chinese market.
It was unclear if the Chinese government will conclude a deal with  Tesla  to coincide with U.S. President Donald Trump’s visit next month.
 Tesla  Chief Executive Elon Musk has said  the company  eventually will need vehicle and battery manufacturing centers in Europe and Asia.
 Tesla  is wrestling with production problems at  its  sole factory  in Fremont  California.  It  is trying to accelerate output of  its  new Model 3 sedan  but conceded earlier this month that production bottlenecks had held third-quarter production to just 260 vehicles  well short of the 1 500 previously planned.

Tesla reaffirms effort to build cars in China; mum on deal report