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Tesla to produce 'affordable' Model 3 in China by year-end

Elon Musk breaks ground at Shanghai Gigafactory and targets 2020 mass production

Tesla CEO Elon Musk and Shanghai's Mayor Ying Yong attend the Tesla Shanghai Gigafactory groundbreaking ceremony in Shanghai on Jan. 7.   © Reuters

LAS VEGAS, U.S. -- Electric vehicle maker Tesla broke ground Monday on its Shanghai Gigafactory with the goal of starting production on its Model 3 mass-market sedan in China by the end of the year.

CEO Elon Musk, who attended the groundbreaking ceremony with Shanghai Mayor Ying Yong, wrote on Twitter Sunday that the company aimed to "finish initial construction this summer, start Model 3 production end of year & reach high volume production next year."

The factory will "produce affordable versions" of the mass-market Model 3 and the new Model Y sport utility vehicle "for greater China," Musk wrote. He added that all versions of its flagship Model S, plus higher-cost versions of the Model 3 and Model Y, will "still be built in U.S." for the worldwide market, including China.

Costs are expected to reach about $2 billion for the plant, which will have an annual production capacity of 500,000 units.

The plant marks a step in Tesla's efforts to build clout in the world's biggest electric-vehicle market as the U.S. trade war dampens China-bound exports for the American company. Tesla raised retail prices of its electric cars in China last summer after Beijing imposed retaliatory tariffs on vehicles imported from the U.S., then lowered them last month after the Chinese government announced a temporary tariff cut. Its Chinese sales reportedly plunged 70% year on year in October.

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