Tesla goes big in China with Shanghai plant

Elon Musk speaks at Boring Company community meeting in Bel Air Los Angeles

In April this year, however, China said it would be removing the 50-percent foreign ownership cap for electric vehicle (EV) and plug-in hybrid auto manufacturers as early as this year, in a move that would benefit Tesla enormously, which doesn't have local manufacturing and imports all the vehicles it sells on the Chinese market-the world's biggest EV market.

Tesla sold 14,779 vehicles in China a year ago, according to data from LMC Automotive.

Tesla Inc TSLA.O Chief Executive Officer Elon Musk on Tuesday landed a deal with Chinese authorities to build a new auto plant in Shanghai, its first factory outside the United States, that would double the size of the electric vehicle maker's global manufacturing.

Analysts were divided on whether the price hikes will bother affluent buyers in China where, in big cities like Shanghai and Shenze, it is considered a status symbol to own a Tesla.

Tesla chief executive Elon Musk will meet with Chinese officialsBeijingnghai and Baijing this week.

Tesla signed a memorandum of understanding with the Shanghai government on Tuesday, July 10 announcing its intent to build its first factory outside of the U.S.

Tesla did not respond to a Reuters request for comment. The automaker hopes to eventually build some 500,000 vehicles per year at its Shanghai plant.

Tesla shares rose 2 percent, to $325.17, on the Chinese factory announcement. That's a critical data point for Tesla, which has been burning through cash as it tries to ramp up production of its Model 3 vehicle.

Prices of Tesla vehicles sold in China have increased by over $20,000 thanks to the ongoing trade war between the United States and China. Musk plans for the Fremont factory to produce 450,000 cars or more at full capacity.

Tesla is particularly exposed to escalating trade tensions between China and the US because the company doesn't have a factory in China, unlike other automakers such as BMW, Ford Motor and GM. A Tesla spokesperson said in a prepared statement that after the plant opens, it would take an additional two to three years to sniff that mark of 500,000 vehicles manufactured annually.

Other automakers long ago capitulated to China's strict foreign ownership requirements for auto factories, requiring USA companies to establish 50:50 joint ventures with local firms to build cars in the world's largest auto market.

The agreed-upon factory could be Tesla's other attempt at breaking into the world's largest electric vehicle market.

At the top of the range, the most expensive Model X crossover is now 1.57 million yuan ($240,000) up from about 1.32 million ($200,000) before.

China has emerged in recent years as the world's largest market for electric vehicles.

BMW also announced plans to increase production in China, but it said that was because of increased demand for vehicles there.

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