Tesla begins construction of Shanghai Gigafactory

The factory will open later this year.

Tesla has officially broken ground for its Shanghai Gigafactory. The new factory, which could be partially up and running by this summer, is Tesla's first outside of the United States.

First announced in July, the Shanghai Gigafactory is viewed as an important foothold for Tesla in the world's largest auto market. Not only will the $2 billion factory allow Tesla to produce vehicles more cost effectively for the local market, but it will also help insulate the company from an escalating trade war between the United States and China. Last year Tesla says its U.S.-built vehicle were subject to a 40 percent import tax in China.

Because of those trade tensions, Tesla is actually speeding up construction of its new China factory. Tesla CEO Elon Musk says the factory will be fully completed by the end of the year, but added it could be opened in some capacity as soon as this summer.

The Shanghai factory, the first wholly owned car plant in China, will produce "affordableā€¯ versions of the Model 3 sedan and upcoming Model Y crossover for the local market. According to Musk, higher-priced versions of the Model 3 and Model Y, along with all Model S and Model X vehicles, will still be sourced from the United States. The plant will begin producing the Model 3 in limited quantities by the end of 2019, with high-volume production scheduled for next year. The plant will eventually have the capacity to produce 500,000 vehicles per year, according to Bloomberg, roughly doubling Tesla's current production capacity.

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