Tesla to Open First Overseas Factory in Shanghai, Produce 500,000 Cars A Year

Tesla Inc. is going to open its first overseas production facility in Shanghai, aiming to double its global manufacturing size.

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The American carmaker will build and wholly own a mega factory called Gigafactory 3 at Lingang in Shanghai, with annual capacity of 500,000 vehicles. This will take Tesla’s total global manufacturing capacity to one million vehicles a year. In the auto industry the standard production capacity for most factories is of 200,000 to 300,000 vehicles a year.

The facility would produce the first Tesla cars in around two years after the construction begins.

The Gigafactory 3 will become its first factory in the world’s largest electric car market and the largest foreign investment in the Chinese financial hub’s manufacturing sector, according to a statement by the Shanghai government on Tuesday.

The announcement was made amid Tesla Chief Executive Officer Elon Musk’s three-day visit to China where he met with Shanghai officials to sign related agreements and also unveiled the company’s innovation center in the city.

A factory inside China could also help the company reduce risks triggered by the on-going trade tension. Musk’s in-person visit came amid a trade war simmering between China and the U.S. that is weighing on export of Tesla cars to China. Heavy tariffs imposed on American cars in the first shot of the trade war last week cost Chinese consumers additional around 100,000 yuan ($16,000) for purchasing a Tesla car.