Tesla has a lone assembly plant in the United States where all of its cars are built. It was expected that the company’s first overseas production factory might be in China and Tesla has now confirmed that it has signed a preliminary agreement with the Shanghai government to build a factory where it will manufacture its cars.

A spokesperson for the company confirmed in an email that it will begin construction on the new plant soon after the required permits are secured. The plant will be capable of producing 500,000 electric cars annually for customers in China within two to three years.

It’s pertinent to mention here that Tesla’s California facility is yet to hit that output level partly due to the initial production issues with the Model 3. The company has only recently been able to hit its production goal for the Model 3, its first mass-market electric car.

Tesla has reportedly been in yearlong discussions with authorities in China to open the country’s first production facility to be owned by a foreign car manufacturer. It would also enable Tesla to tap into the Chinese market despite the ongoing trade disputes between Washington and Beijing since it will no longer have to import its cars in the country to sell them there.

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