Tesla Motors representatives have been in talks with several auto manufacturers in China about a possible new factory, which may help boost sales and profits for the electric carmaker.

According to The Want ChinaTimes, Tesla reps have spoken with Lifan Group and Chang’an Automobile Group, both located in China’s southwestern city of Chongqing.

Chongqing has a strong history of supporting electric vehicles, with plans to develop a charging network that will place almost 300 stations throughout the city. Earlier this year, Chongqing also allocated $43 million in subsidies for 3,000 alternative energy vehicles.

Carmakers that ship vehicles to China have to decide between adding import fees to the purchase price, or absorbing the costs for a lower profit. Tesla has opted to do the latter, which has chipped away at the profitability of the Model S.

The advantage of collaborating with a China-based carmaker is that it can eliminate these tariffs. BMW, for one, successfully used this tactic after linking with the Chinese company Brilliance Auto Group.

If Tesla does opt to build its cars in China, it likely won’t be shifting a lithium-ion battery factory to the region as well. By building these components in the U.S. and importing them overseas, Tesla will still be incurring costs that reduce its overall profits.

SEE ALSO: Tesla Shifts Strategy To Tackle Problems In China

Even so, Tesla is tasked to find new solutions to increase sales within the Chinese market. Analysts have said that China is paramount to the overall success of Tesla, and Musk has predicted that the area could potentially match the U.S. in overall sales.

In an effort to jump start flat sales within the country, Tesla recently revamped its market strategy for China. The company also now includes a slow-charging mobile connector with the Model S, and created an upgraded back seat option to appeal to affluent Chinese consumers.

Linking with a local automaker may also help solve another charging issue Tesla is struggling with. Though it has been well documented that Tesla has had to overcome charging misconceptions in China, The Want ChinaTimes is reporting another problem:

“Tesla’s battery charger is not in line with China’s national standard, disqualifying it from the policy on the exemption of vehicle purchase taxes for new energy vehicles published last August,” explained the Taiwan-based news source. “It would save 70,000-80,000 yuan ($11,300 – $13,000) on each car according to its selling price if it was on the list, an analyst said.”

Tesla hasn’t made any final announcements yet, though Musk recently projected that a China-based factory could be possible in three years.

The Want ChinaTimes

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