BEIJING — Tesla broke ground Monday morning on its newly planned factory in Shanghai, the first factory to break ground outside the United States.

Tesla CEO Elon Musk took to Twitter on Monday to announce that the company will start production of its Model 3 and a planned crossover in China by the year’s end.

Plans were also announced back in July to build the third Gigafactory in China, despite economic tensions between Washington and Beijing.  That announcement followed Beijing’s announcemenet that it would end restrictions on foreign ownership of electirc vehicle producers this year, in an effort to motivate industry development.  China is currently the world’s biggest electric vehicle market.

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“Looking forward to breaking ground on the Tesla Shanghai Gigafactory today!” said Musk on Twitter. “Aiming to finish initial construction this summer, start Model 3 production end of year & reach high volume production next year.”

China’s State broadcaster, CCTV, showed Elon Musk and other officials attending a ceremony in the rain monday, in the outskirts of Shanghai.  According to Musk, the new factory will produce “affordable versions of 3/Y for greater China”.  To company has yet to give it’s new crossover an official name, and continue to simply call it the ‘Y’.  Higher priced models will be built in the United States factory and exported to China.

elon-musk tesla Shanghai
Tesla CEO Elon Musk, left, walks with Shanghai Mayor Ying Yong during the ground-breaking ceremony for a Tesla factory in Shanghai on January 7, 2019.
China OUTSTR/AFP/Getty Images

Tesla, based in California, has joined with other automakers, including Nissan, Volkswagen, and GM in pouring billions of dollars into manufacturing electric vehicles in China.  Producing the vehicles in China would eliminate tariff concerns and risks from import controls.  Producing the vehicles locally also makes them more appealing to Chinese buyers.

In October, Tesla signed an agreement for 210-acres of land in the Lingang district in southeastern Shanghai.  Shanghai is ground zero for China’s auto industry, and home to Shanghai Automative Industries Corp., a state-owned manufacturer for GM and VW.  Tesla has yet to reveal the price of the land, but the Chinese officials have said it would be the biggest foreign investment to date.

Tesla faces some stiff competition from Chinese companies, including BAIC Group and BYD Auto, which already sell tens of thousands of hybrid and electric SUVs and Sedans every year.  Until today, foreign automakers that wanted to build in China were required to work through state-owned partners, such as the Shanghai Automotive Industries Corp.  Many global automakers balked at the idea of bringing their electric vehicle tech into China over fears of having to share it with competitors.

The first electric vehicle developed in China by a global automaker, Nissan’s Sylphy, came off the assembly line in August.  Lower-priced models from GM, VW and more are due to hit the Chinese market this year, well before Tesla’s new factory is up and running.

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