Musk says Tesla negotiating with China on local production

Editor's note: Earlier versions of this story had an incorrect translation, Reuters advises. Tesla is negotiating with China on local production, but the earlier reference to a time frame was incorrect.

SHANGHAI (Reuters) -- Tesla Motors Inc. is negotiating with the Chinese government on potentially producing cars domestically, CEO Elon Musk said.

Local production has the potential to slash the sales prices of its models by a third, he said, according to the automaker's written releases on Musk's remarks on Thursday and Friday in Beijing.

Foreign automakers are generally required to establish a joint venture with a Chinese company to produce cars domestically.

The California-based automaker has struggled with weak sales in China, leading to job cuts this year. Domestic media has put the headcount reduction at 30 percent of its 600 staff.

The company, which does not regularly release China sales data, said in a release on Friday that it had sold 3,025 Model S cars in the country from January to September.

Musk also said Tesla is already working with Chinese Internet company Baidu Inc. on GPS navigation and automated driving.

He added that Tesla's giant $5 billion battery plant in Nevada, known as the "gigafactory" would produce its first batch of batteries next year, estimating that the plant would reach full capacity in two to three years.