Chinese firm's shares soar on Tesla report

Shares of a little-known Chinese real estate company soared Tuesday after reports that its parent company had signed a $9 billion MOU with electric carmaker Tesla for its first production plant in the Asian giant.

Trading in the shares of Shanghai Jinqiao Export Processing Zone Development was suspended in Shanghai in the afternoon after they went up by the daily limit of 10 percent to 21.60 yuan.

The firm is the listed arm of Jinqiao Group, a state-owned enterprise developing an area that is part of Shanghai's free trade zone.

The surge followed a Bloomberg News report that the group will team up with Tesla to build electric cars in the commercial hub.

Each side will invest about 30 billion yuan ($4.6 billion), Bloomberg quoted a person with knowledge of the matter as saying.

Tesla has been looking to produce vehicles in the world's largest auto market, but under Chinese law it needs a local partner as Beijing bans foreign firms from having factories of their own, only allowing them to set up joint ventures.

"This would be a major win for Tesla and Shanghai," Bloomberg Intelligence quoted its auto analyst Steve Man as saying. "The investment will probably include a nationwide dealership network, superchargers, R&D centre and potentially a second 'Gigafactory'," referring to a US facility to produce batteries for the vehicles.

Shanghai is not the only city hoping to host Tesla's China project. Government documents circulated online showed that nearby Suzhou held meetings in March to discuss how to win the deal.

Tesla has plans to expand from a niche car maker to a major industry player, producing 500,000 cars a year by 2018.

But its vehicles can cost up to $150,000 in China and it has struggled in the market despite early positive media coverage, building up an inventory of unsold cars and laying off staff.

The company said last October that it sold more than 3,000 cars in China in the first nine months of 2015.