Elon Musk Says Tesla is Breaking Ground on Shanghai Gigafactory

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Tesla chief Elon Musk extended his vision of a world dominated by electric vehicles by traveling to Shanghai, China, to break ground for the company's newest plant, Gigafactory 3.

The company plans to build a new factory in China to produce Tesla Model 3 electric vehicles.

Tesla Inc. (NASDAQ: TSLA) has officially broken ground on a new $5-billion USA factory in China, the world's largest automotive market. For context, that number is about double Tesla's current yearly production.

The first of the new electric models being developed by global automakers to hit the market, Nissan's Sylphy Zero Emission, began rolling off a production line in southern China in August.

A fully owned facility also would mean Tesla won't need to share its profits and technology with Chinese partners, unlike other foreign carmakers who are required to form a domestic joint venture.

'Affordable cars must be made on same continent as customers, ' Musk wrote on Twitter ahead of the event.

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".

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Musk previously announced that the company's smaller models - the Model 3 sedan and the upcoming Model Y SUV - will be made at the plant, but not the older Model S and Model X.

Wu Qing, a vice mayor of Shanghai, said the Tesla factory, the largest foreign direct investment project on record in Shanghai, was progressing on a rapid pace with the local government's support as Shanghai looked to enhance its manufacturing might.

Trade war aside, the carmaker is building the plant in an auto market that likely contracted a year ago for the first time in decades.

Tesla has been pushing forward its plans for the plant after it secured the site in October, hiring staff, starting procurement for building materials and setting up a financial leasing company in the city.

At the time, Tesla said the costs that go into its cars are roughly 55% to 60% higher than for local firms, when tariffs and sea transport costs are take into account.

The peak annual turnout of the Shanghai factory will be half a million Teslas and the same amount of battery packs, to be achieved two to three years after the launch of production, Tesla said in July after the signing of the deal with Shanghai authorities.