Elon Musk joined the mayor of Shanghai and other local government officials for a ground-breaking ceremony at the site of Tesla’s new Chinese plant.

Tesla plans to invest around $2 billion in the facility, which is expected to have a capacity of about 500,000 vehicles per year. The company hopes to finish initial construction this summer and quickly begin producing Model 3 vehicles there. “We think with the resources here we can build the Shanghai Gigafactory in record time, and we’re looking forward to hopefully having some initial production of the Model 3 towards the end of this year and achieving volume production next year,” Musk said at the event.

Tesla’s Gigafactory 3 will be China’s first wholly foreign-owned car plant, a reflection of the country’s recent moves to open up its auto market. Local production is seen as a necessary move for Tesla, not only to minimize the impact of the ongoing US-China trade war, but to help it fend off competition from domestic EV startups such as Nio, Byton and XPeng. “Affordable cars must be made on same continent as customers,” Musk recently tweeted.

“Shanghai Giga will produce affordable versions of 3/Y for greater China,” tweeted Musk. “All Model S/X & higher cost versions of Model 3/Y will still be built in US for [the worldwide] market, [including] China.”

Shares in Chinese suppliers to Tesla, including Tianjin Motor Dies and VT Industrial Technology, rallied following Musk’s tweets.

Source: Reuters