Tesla to build China plant with 500,000 car capacity

beijing — Tesla Inc has reached a preliminary agreement with the Shanghai government to build a factory that will rival production from its lone US assembly plant, as Elon Musk takes his biggest step yet to expand overseas.

Construction will begin soon, after securing needed permits, and it will produce 500,000 electric vehicles a year for Chinese consumers in two to three years, the company said in a statement. While Musk, 47, said more than two years ago that he expected Tesla would produce that many vehicles a year from its lone car plant in California by 2018, the company is well off that pace because of slower-than-expected output of the Model 3 sedan.

The memorandum of understanding is a major development in a more than yearlong effort by Tesla to open China’s first production facility to be wholly owned by a foreign carmaker. Work toward getting the factory built has gained urgency as Donald Trump engages in a trade war that’s ensnared imports of the company’s vehicles into China. Tesla follows HarleyDavidson Inc in charting plans to expand outside the US to circumvent tariffs that have surfaced amid the US president’s escalating trade disputes.

The youngest publicly held US automaker is looking to expand its capacity and more efficiently reach global markets. Tesla’s lone carassembly plant is in California where it’s built about 88,000 cars through the first half of this year, and it has a giant battery factory in Nevada. — Bloomberg