China presents a massive growth opportunity for Tesla and rivals such as BMW AG and Daimler AG, which are seeking to take advantage of a massive and fast-growing market for new-energy vehicles.
Tesla has reached a preliminary agreement with the Shanghai government to build a factory that'll rival production from its lone USA assembly plant, as Elon Musk takes his biggest step yet to expand overseas.
"According to the agreement, both parties will focus their cooperation on jointly promoting technology innovation and industry development, where the city of Shanghai will strongly support Tesla Shanghai", says a translated press release from the Shanghai Municipal People's Government provided to The Drive by Tesla.
The quest to construct its third so-called gigafactory gained urgency as Donald Trump has engaged in a trade war that's ensnared imports of Tesla's vehicles into China.
The signing ceremony was attended by Tesla chairman Elon Musk, Mayor Ying Yong and other Chinese officials, according to the city government.
Tesla analysts have noted that the Fremont factory has no room to add an additional assembly line to build the planned Model Y SUV, which Musk has said is due in late 2019 or early 2020.
Tesla did not respond to a Reuters request for comment. As of Monday, however, those with the financial resources and patience to wait for a delivery can get a Tesla Model 3, automotive news website Electrek first reported.
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Tesla hiked prices in China over the weekend to a level more than 70 percent higher than in the United States amid mounting trade frictions between Washington and Beijing that have seen several USA imports, including cars, become subjected to retaliatory tariffs of 25 percent.
"Raising the prices is going to hurt sales, but money-losing Tesla has to raise prices because they can't afford to fully absorb the higher costs of the tariffs", CFRA research analyst Efraim Levy said.
At the top of the range, the most expensive Model X crossover is now 1.57 million yuan ($240,000) up from about 1.32 million ($200,000) before.
Tesla will be allowing people in the US and Canada to bypass a reservation process for the Model 3, according to a report.
Musk had previously criticized China's tough auto rules for foreign businesses, which would have required it to cede a 50-percent share in the factory.
By building another factory in their second-largest market, Tesla could bypass the tariff war between the U.S. and China. This comes just one day after Tesla's announcement of a 20 percent price increase on American-made cars sold in China. That gave it about 3 per cent of the nation's battery-powered electric-vehicle market, placing it as the No. 10 brand in that segment.
Musk has also said the company will reveal plans near the end of 2018 to build a factory in Europe.