Construction of a new Tesla factory in Shanghai began on Monday, the electric auto company's first plant outside the United States. He was in Shanghai for the ground-breaking ceremony.
Tesla has got off to a quick start to build affordable cars for Chinese customers after the US' bestselling electric carmaker broke ground for its Shanghai plant on Monday with chief executive Elon Musk announcing the plan to start production of its Model 3 by the end of 2019.
Alan Kang, Shanghai-based analyst for consultancy LMC Automotive: "Tesla's sales [in China] have dropped over the past few months because of high prices caused by the tariffs".
"With the construction of the Shanghai factory, the faster the better [for Tesla]".
Domestic production would help shield Tesla against import duties as the US and China find ways to wriggle out of the tariff quandary.
The factory is expected to double Tesla's electric vehicle production, beginning in two years.
The Model S, Model X and "higher cost versions" of the 3 and Y would continue to be made in the United States for the global market, including China, he added.
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China is the largest market for electric vehicles, and most forecasters predict EV sales in the country will accelerate rapidly as government regulation drives toward a goal of 100 per cent electric vehicles by 2030. The Shanghai plant is created to make another 500,000 cars annually-a massive step up for a company that sold fewer than 14,000 cars in China in the first nine months of 2018, according to LMC Automotive, which tracks the auto market.
"And the competition is getting more and more fierce".
The Shanghai factory is being billed as a Gigafactory that "will allow Tesla to localize production of Model 3 and future models sold in China, with plans to eventually produce approximately 3,000 Model 3 vehicles per week in the initial phase and to ramp up to 500,000 vehicles per year when fully operational (subject to local factors including regulatory approval and supply chain constraints)".
"The high-end versions of the Model 3 - the price will still remain the same next year", Musk said Monday in an interview with Kanka News, an online news portal for government-run Shanghai Media Group.
Tesla has opened a tender process to build a $2 billion plant in Shanghai - dubbed a Gigafactory - and at least one contractor has started buying materials, Reuters reported earlier last month.