Tesla announced Thursday it is in talks with the Shanghai municipal government to set up an electric vehicle manufacturing plant in the Chinese city. 

The US-based automaker said it wanted to open a plant in China to avoid a 25-percent tariff on imported vehicles.

The company did not provide a timeline for setting up the plant, but said it expects to "more clearly define" its China production plans by the end of this year.

Traffic jam in Beijing, June 23, 2017. /VCG Photo

The Chinese government requires foreign companies interested in entering the Chinese market in relevant industries to have a local partner and own no more than a 50-percent share in the venture. 

So far, Tesla has not said whom it might partner with but experts predict Shanghai Electric Group Co, Shanghai Lingang Holdings Co, and Tianjin Motor Dies Co could be in the running. The three companies have said however that none of them has been in touch with Tesla about its plans. 

The plane of red Tesla's electric car /VEXELS Photo

Some have said China's internet giant, Tencent Holdings Ltd, could "under charge" this business after Tencent acquired a five-percent stake in Tesla for 1.8 billion US dollars earlier this year. 

Tesla has not said which of its models it plans to build in China. 

Tesla is the most valuable US automaker, with a market capitalization of more than 60 billion US dollars, but it has yet to turn an annual profit.

(With inputs from Reuters)