BEIJING – Electric vehicle maker Tesla will build its first factory outside of the United States in Shanghai under a deal signed on Tuesday, becoming China's first wholly foreign-owned automaker  The announcement Tesla Inc. is witnessing growing US-Chinese tensions in technology and following Beijing's April promise to end restrictions that force foreign automakers to work through local partners.
Tesla said the construction would begin in the near future once official approvals have been obtained. He said the production would start two to three years later and eventually rise to 500,000 vehicles a year.
No financial details have been disclosed. A city government said the factory was the largest foreign investment in Shanghai so far, a basis for joint ventures between General Motors Co. and Volkswagen AG and a state-owned automaker.
At the signing ceremony, Tesla chairman Elon Musk, mayor Ying Yong and other Chinese officials participated in the city government.
China is the world's largest electric vehicle market, but Tesla and other producers including GM and Nissan Motor Co. had resisted relocating manufacturing in that country due to the requirement to share technology with Chinese partners who could become competitors.
Tesla began selling cars in China in 2014 by shipping them from its California factory, which added a 15 percent import fee to the price. Nevertheless, China quickly became its second largest market after the United States.
"Tesla is strongly committed to the Chinese market," the company said in a statement.
Tesla is among the companies that are affected by an additional 25 percent import tariffs imposed by Beijing for a tariff increase by US President Trump in a dispute over technology policy.
Automakers invest billions of dollars in the development of electric cars for China.
GM, Ford Motor Co., VW, Nissan and other competitors have announced plans to develop models for China's low-income market with local automakers.
Sales of all-electric cars in China rose 82 percent to 468,000 last year, according to an industry group, the China Association of Automobile Manufacturers. That was more than double the US level of just under 200,000.
Beijing uses its market access as a lever to get global automakers to help Chinese brands develop battery and other technologies.
Electric cars will earn at least 10 percent of their sales from next year or buy credits from competitors that exceed their quotas. Later, they will be under pressure to increase sales to meet increasing fuel efficiency requirements.
German BMW AG announced Tuesday that it has partnered with China's largest SUV manufacturer, Great Wall Motor, to produce electric versions of its MINI
Tesla said it would set up a research and development facility in Shanghai.
The company said that the China factory would not affect production in the United States, which will predict.
Tesla Announced Last Year It was talked to the Shanghai city government about possibly building a factory.
The plan continued after Beijing announced in April that the limits for foreign owners of electric vehicle manufacturers would end this year.
The Communist Party believes that its own producers, such as BYD Auto, are able to compete in performance and price with global brands.
Ownership Restrictions According to the government, local authorities are expected to "strongly support" Tesla as part of efforts to develop Shanghai as a center for electrical research and production.
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