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Tesla says it will build a factory in China that can produce 500,000 cars a year


The move could help cement the brand in China and circumvent steep tariffs on the cars.

The news: Tesla has signed an agreement to build what it’s calling “Gigafactory 3” in Shanghai. Construction will begin as soon as all permits are received, and it’s estimated to take two years to complete.

Full speed ahead: When the facility hits full throttle, Tesla estimates, it will be able to churn out 500,000 cars a year for Chinese customers—though meeting production estimates hasn’t been one of Tesla’s strong suits.

First of its kind: Unlike other foreign automakers that have set up plants in China, Tesla will be the sole owner of the new production facility. In the past, outside car companies were required to partner with Chinese companies. (UPDATE: According to Reuters, a government official has said that China is speeding up the rate at which the country plans to relax restrictions on foreign investment in its automotive industry.)

Why it matters: Tesla has been hit hard by the trade war between the US and China. It had to raise prices on its Model X and Model S cars by $20,000 for Chinese customers. The company is following in the footsteps of Harley-Davidson—which announced it’ll shift more production outside the US to avoid EU tariffs—and moving manufacturing overseas to lower costs.