Tesla secures land in Shanghai for its first plant outside the United States

The Tesla Electric Automotive brand Inc. announced it had signed an agreement Wednesday to secure the land of its first plant located in Shanghai, outside the United States. It continues to grow despite rising trade tensions between the United States and China.

Tesla, based in Palo Alto, California, announced plans for the Shanghai plant in July, after the Chinese government announced the lifting of restrictions on full foreign ownership of electric vehicle manufacturers to accelerate the development of the sector.

These plans were implemented despite tariff increases by Washington and Beijing on billions of dollars worth of goods between them as part of a dispute over Chinese technology policy. US imports targeted by Beijing sanctions include electric cars.

China is the world's largest market for electric vehicles and the second largest market in Tesla after the United States.

Tesla joins global automakers, including General Motors Co., Volkswagen AG and Nissan Motor Corp., which are investing billions of dollars in electric vehicle manufacturing in China.

Local production would eliminate the risks associated with customs duties and other import controls. This would help Tesla develop spare parts suppliers and make its vehicles more attractive to major Chinese buyers.

Tesla said it signed a "land transfer agreement" on a 210-hectare (84-hectare) site in Lingang District in southeast Shanghai.

This is "a milestone for what will be our next advanced and sustainably developed manufacturing site," said Tesla's vice president of global sales, Robin Ren, in a statement.

Shanghai is a center of the Chinese automobile industry and is home to Shanghai Automotive Industries Corp., the leading local manufacturer of GM and VW.

Tesla said earlier that production in Shanghai would start two to three years after the start of factory construction and would increase to 500,000 vehicles a year.

Tesla has not yet said how he will pay for the Shanghai factory. The company has not yet announced the price, but the Shanghai government said it would act as the largest foreign investment made to date.

Tesla's $ 5 billion Nevada battery plant was funded through a $ 1.6 billion investment from Panasonic Corp. battery manufacturer.

Analysts expect Tesla to report a loss of approximately $ 200 million for the quarter ended Sept. 30, after the loss of $ 742.7 million in the previous quarter. Its managing director, Elon Musk, said in a letter to US securities regulators, dated Sept. 30, that the company "was about to achieve profitability".

Estimated sales of Tesla in China to less than 15,000 vehicles in 2017 gave it a market share of less than 3%.

The company faces competition from Chinese brands, including BYD Auto and BAIC Group, which already sell tens of thousands of hybrid and 100% electric sedans and SUVs every year.

Until now, foreign builders wishing to manufacture in China had to work with partners belonging to the state. Foreign brands have been reluctant to introduce electric vehicle technology in China to avoid sharing it with potential future competitors.

The first of the new electric models developed by global manufacturers to enter the market, Nissan's Sylphy Zero Emission, began being launched on a production line in southern China in August.

The low-cost electric models of GM, Volkswagen and other global brands are expected to hit the market from this year, long before Tesla is operational in Shanghai.