Shares of Tesla (TSLA) are in focus following the company's confirmation it is working with the Shanghai government to explore production in China.

NOTABLE: It was reported by various media agencies that Tesla signed a preliminary agreement with Shanghai to produce vehicles in China in a move that could reduce manufacturing, labor and shipping costs for the automaker. In an emailed statement to The Fly, a Tesla spokeswoman said, "Tesla 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 have said before, we expect to more clearly define our plans for production in China by the end of the year. Tesla is deeply committed to the Chinese market, and we continue to evaluate potential manufacturing sites around the globe to serve the local markets. While we expect most of our production to remain in the US, we do need to establish local factories to ensure affordability for the markets they serve." Under the deal, Tesla would be able to construct factories in Shanghai's Lingang development zone allowing it to better compete with Chinese automakers through the elimination a 25% import tariff that makes its Model S sedans and Model X SUVs more costly. The company, which expects to start production of its Model 3 in its sole assembly plant in California in July, would also need to establish a joint venture with at least one local company to be granted manufacturing permits under current rules.

PRICE ACTION: Tesla rose 1.5%, or $5.69, to $382.09 in afternoon trading.