Elon Musk pivots to China with Tesla's first foreign factory

A row of new Tesla Model 3 electric vehicles is seen at a parking lot in Richmond California

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.

The Tesla logo is seen at the entrance to Tesla Motors' new showroom in Manhattan's Meatpacking District in New York City, U.S., December 14, 2017.

Tesla has finally signed a formal agreement with Shanghai officials to build its first factory in China.

An announcement by Shanghai's government said an agreement had been reached to build the plant in the commercial hub's Lingang district.

The quest to construct its third so-called gigafactory gained urgency as Donald Trump has engaged in a trade war that's ensnared imports of Tesla's vehicles into China. Bloomberg reported earlier that Musk, Tesla's chief executive officer, would be in the city for an event with the government on Tuesday. Foreign companies have historically had to form a 50-50 joint venture with a local partner to build a factory in China.

Tesla and Shanghai authorities did not immediately respond to requests for comment. It said auto production there should begin about two years later, and that it should then be another two to three years after that for the plant to reach its 500,000 annual car-production capacity.

Its basic Model S sedan in China now costs about 849,900 yuan ($128,779), versus 710,579 yuan in May, while a Model X sport-utility vehicle costs about 927,200 yuan, versus 775,579 yuan, according to Tesla's website.

The plant will start producing cars two or three years after construction begins, according to Reuters, with an eventual capacity of 500,000 cars per year.

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Tesla is among companies hit by additional 25 percent import duties imposed by Beijing in retaliation for a tariff hike by U.S. President Trump in a dispute over technology policy. That level would be more than double the current US market, where new light vehicle sales run at about 17 million vehicles a year. "We've been impressed by the beauty and energy of Shanghai and we want our factory to add to that".

Citing Tesla's lower than expected Q2 delivery numbers and higher costs, Brinkman lowered Tesla's EPS forecasts saying he now expects a Q2 loss per share of $2.80, compared with his previous estimate for a $2.45 loss per share.

By building another factory in their second-largest market, Tesla could bypass the tariff war between the United States and China.

BMW exported about 81,000 cars from a plant in SC to China previous year, generating about $2.4 billion in sales.

Musk has also said the company will reveal plans near the end of 2018 to build a factory in Europe.

Tesla probably will make the smaller Model 3 sedan and upcoming Model Y crossover in China, Musk said in November, rather than the pricier Model S or Model X that often sell for more than $100,000 in the US.

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

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