Southern Metropolis Daily, a local newspaper in Guangdong, China, claimed recently that Tesla may set up a factory in Guangdong province. Citing insiders, the publication reported that the production base could be built via a wholly-owned enterprise in the Chinese manufacturing and assembly hub. However, the automaker has denied having any such plans.

Tesla China factory guangdong
Blomst / Pixabay

No plans for a factory in Guangdong

The report, which cited Chinese insiders, said that the plan still requires the approval of the local government and may be subject to change. Further, the local report said the electric car maker has been seeking ways to start local production facilities in the country in order to enable buyers of its electric cars to enjoy lower costs and government subsidies. The electric car maker could decrease its border tax by producing electric cars within China.

The report also said that the factory address had been selected, and the automaker will announce the project this year if all goes according to plan. However, when contacted by CNBC regarding the issue, the U.S.-based automaker said it has no current plans to build a factory in Guangdong province.

In an email to CNBC, a Tesla representative said, “Tesla is deeply committed to the Chinese market, however the rumors that we plan to open a factory in Guangdong are not true.”

According to China Money Network, many Chinese cities and local governments have approached the U.S. firm to set up operations in their territory. Previously, the EV maker has also been rumored to be partnering with Shanghai Jinqiao Group Co. to develop a plant in Pudong, Shanghai.

What does Tesla have that Chinese startups don’t?

Some would say that Tesla currently rules the electric car market. Last week, the automaker reached a market cap of $49 billion and pulled in over $7 billion in revenue in 2016. However, along with its increasing market cap, its competition is also increasing. Many Chinese investors are backing startup companies that are building electric cars.

“Tesla has a target on its back, not only from traditional automakers but also these start-ups,” said Jeff Schuster, senior vice president at LMC Automotive, according to CNBC. “But it’ll be a challenge. Tesla now has critical mass and funding.”

Chinese-backed startups and Tesla have one thing in common: Chinese investors. However, the former is missing something: Elon Musk. The EV firm recently received a large investment from a Chinese company. Tencent bought a 5% stake in the U.S. firm by investing about $1.8 billion.

Michael Harley, executive analyst for Kelley Blue Book, said none of the startups backed by Chinese investors shy away from the spotlight, but none are spearheaded by a successful entrepreneur who is continuously changing and challenging the world, notes CNBC.

Schuster, however, believes that the long-term prospects for the Model S maker are still debatable because of the presence of large mainstream manufacturers like BMW and General Motors.