Tesla Secures Land for China Factory—For a Reported $140 Million

October 17, 2018, 2:58 PM UTC

Tesla’s foray into China is becoming a reality.

After announcing in August that the company would be investing $5 billion in a factory outside Shanghai—its first outside the U.S.—it has finally secured the land for the planned gigafactory.

Tesla signed an agreement with the government for a 860,000-square-meter plot of land, or approximately 210 acres, according to a Wednesday announcement. While the company did not announce the cost of the land, the Shanghai Bureau of Planning and Land Resources suggested that it cost $140 million.

“Securing this site in Shanghai, Tesla’s first Gigafactory outside of the United States, is an important milestone for what will be our next advanced, sustainably developed manufacturing site,” said Robin Ren, Tesla’s vice president of worldwide sales.

The Chinese factory will be in Lingang, a city situated southeast of the center of Shanghai on the coast. Tesla plans to produce cars from the factory in three years. While it plans to have a production capacity of as many as 500,000 cars by the end of a decade, the factory will initially produce about 250,000 Tesla cars and battery packs a year.

The U.S.-China trade dispute has forced up the cost of importing Tesla vehicles in China. But China is the No. 2 market for Tesla after the U.S., so it remains a priority market. It sold 17,000 cars there last year, and about 50,000 in the U.S. Tesla hopes that by producing cars locally it will be able to circumvent possible future risks from tariffs and other import controls.