Tesla Motors founder Elon Musk said on Friday his company plans to "localise production" of electric cars in China over the next three years, state media reported.
"We have a strong long-term commitment to China and we tend to establish both local production and local engineering in China," he said in an interview with the official Xinhua news agency.
Localising production in China, as well as Europe, is "just the sensible, logical thing," he said in the report.
Foreign automakers must set up joint ventures with Chinese partners in order to produce and sell cars into the domestic market.
US-based Tesla began delivering imported cars to Chinese buyers last year, but Musk admitted sales had fallen short of expectations and blamed "speculators," Xinhua said.
"China is the only place on Earth that we have excess inventory," he said.
Tesla confirmed this month that it is cutting jobs in China, after a domestic newspaper reported the company will reduce staff by 30 percent after sales failed to meet expectations, Bloomberg News reported.
Sales of the Model S in China were hit by rumours last year -- which Tesla said are untrue -- that owners would not be able to recharge them at home.
Tesla also faced an early stumble in the world's biggest auto market after it was forced to resolve a dispute with a Chinese businessman over the use of its trademarks in the country.
Analysts say Tesla might only find a niche market in China, given premium prices and consumer reluctance to drive electric cars.
China notched up sales of more than 23 million vehicles last year, but growth has slowed as a weak domestic economy takes its toll.