On Wednesday, Tesla has announced in their Chinese social media page that it has signed an agreement with the Shanghai government to purchase a 860,000 square meter plot of land to construct its first overseas Gigafactory.
The land agreement pushes forward Tesla's plans to accommodate their growing clientele in China and make cars locally despite the tariffs currently imposed by Beijing on US-made goods, triggering price hikes for its imported models.
The car company had signed the deal with Shanghai authorities in July to build the Gigafactory in China, which would enable it to boost its production to 500,000 cars per year and lower the price of Tesla cars in China. It is also expected that the factory can help develop China's growing market for new-energy vehicles or NEVs. However, Beijing is currently regulating the subsidies given to NEVs despite its high sales to ensure that local electric car start-ups will not be affected by overcapacity.
In a statement, Tesla's vice president of worldwide sales Robin Ren said, "Securing this site in Shanghai, Tesla's first Gigafactory outside of the United States is an important milestone for what will be our next advanced, substainably developed manufacturing site."
While the price of the land was not given, the Shanghai Bureau of Planning and Land Resources said on Wednesday that a land measuring 864,885 square meters had been sold at an auction for 973 million yuan recently.
Hiring for the Shanghai factory started in August and further capital for the plant's construction is expected to be collected from Asian debt markets and it may cost around $2 billion.
