(Yicai Global) March 15 -- The Shanghai government has a good relationship with Tesla Inc. and both parties with continue to negotiate the possibility of the electric carmaker setting up shop in China, a source told state-backed online news outlet The Paper.

The insider, who works at the Shanghai Municipal Commission of Economy and Informatization, said that the foundation of the relationship is based on the mutual aim of facilitating new-energy vehicle development. The pair will release details once they are finalized, he added.

NEVs are rising to prominence in China as the central government looks to end production of traditionally-fueled cars. Sales in the country grew 30 times faster last year than any other country, according to industry researcher EV Volumes.

Shanghai policies favor innovation and NEV development, and Tesla commends its strategies aimed at promoting greener vehicles, the source said, adding that the US-based firm also appreciates the sound investment environment in the city and will likely spend more money there.

Elon Musk, chief executive and the face of Tesla, said in a conference in November that his firm planned to make cars in China within three years to produce for the local market and surrounding nations. Reports from October suggested that Tesla had already penned an investment agreement to build a plant in the Shanghai Free Trade Zone.

The firm's sole battery supplier and the world's largest EV battery maker, Panasonic Corp., is also considering following suit and setting up shop in the world's largest NEV market, Securities Daily reported in January, quoting President Tsuga Kazuhiro as saying at CES 2018 in Las Vegas. Panasonic commanded a 29-percent global market share in the first half of 2017, and has supplied Tesla with nearly 100 million cells a year since it began supplying the carmaker in 2008.