Tesla Motors (NASDAQ:TSLA) plans to produce electric vehicles within two years in China.
Chief Executive Elon Musk said local production had the potential to slash the sales prices of its models in the world's largest auto market by a third, thanks to reduced shipping costs and avoidance of import duties.
He made the remarks at a Tsinghua University event in Beijing.
Musk said Tesla's negotiations with officials on Chinese production have been quite encouraging and it is likely the company will cooperate with a local partner.
Foreign automakers are generally required to establish a joint venture with a Chinese company to make cars domestically.
The Palo Alto, California-based automaker has grappled with weak sales in China, leading to job cuts this year.
The company sold 3,025 Model S cars in the country from January to September. The Model S sedan price starts at $106,000 in China, including duties and other taxes.
By 2030, more than half the newly produced vehicles in the world will be battery-powered, and China will take the biggest share, Musk was quoted as saying.
Shares wavered and was last down 0.2% at $211.63 at 10:21 am. in New York. The stock has lost 3.9% this year.