Tesla To Break Ground On Shanghai Plant As Trade War Lingers

Tesla Chief Elon Musk said the electric car-maker would break ground on Monday, January 7, on a Shanghai factory that will allow it to sell to Chinese consumers and avoid tariffs from the China-US trade war.

The firm in July unveiled plans for what is Musk's biggest overseas move yet, saying the factory's eventual annual production of 500,000 vehicles would dramatically increase its output and allow more direct access to the world's biggest electric-vehicle (EV) market. 

"Looking forward to breaking ground on the @Tesla Shanghai Gigafactory today!" Musk said on his official Twitter account.

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"Aiming to finish initial construction this summer, start Model 3 production end of year & reach high-volume production next year." Chinese media reports said Musk would be in Shanghai to break ground on the plant, which Bloomberg News has reported could cost $5 billion.

Tesla's Shanghai venture comes as the US companies face pressure from Donald Trump to keep manufacturing jobs at home, and as Beijing and Washington persist with a trade spat that has seen both sides levy tariffs on hundreds of billions of dollars of products.

Analysts have said production in China would allow Tesla to avoid such tariffs, which already have caused a spike in the price of the cars that Tesla now imports to the Chinese market.

But since Tesla announced plans for the factory on land outside Shanghai's urban core, the outlook for China's consumer market has turned worrisome. Apple sparked global alarm over the prospects for the world's second-largest economy last week when it cut its revenue forecast citing slowing demand in China and the trade war.

Domestic and foreign automakers have been racing to grab a share of the EV sector, which is expected to continue to grow rapidly as the Chinese government pushes cleaner technologies, partly to help combat chronic air pollution.

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The Shanghai factory will be Tesla's first production line outside the United States. China typically requires foreign automakers to set up joint ventures with domestic firms when establishing manufacturing plants, which entails the sharing of profits and technology with local partners.

But Tesla has said its Shanghai plant will be "wholly-owned" by the company.