Tesla Moves Forward With Plans For China Factory

Tesla Inc TSLA shares popped more than 2 percent Tuesday morning on news that the automaker is advancing plans for a factory in China.

The progress, which was first reported by Bloomberg, comes a year after Tesla first announced its consideration to build a Shanghai site.

Why It’s Important

The new facility will be able to produce 500,000 vehicles per year to serve Tesla’s No. 2 global market.

Importantly, the domestic production could serve to protect margins by supporting savings on shipping and sourcing while at the same time helping Tesla work around burdensome trade tariffs

China raised duties on U.S. cars from 25 percent to 40 percent last week, which forced $30,000 increases in the local selling prices of the Tesla Model S and Model X and made the vehicles widely unaffordable.

"China is a huge market for Tesla," CNNMoney's Daniel Shane reported. "Revenues in the country doubled last year to more than $2 billion, accounting for almost 20% of the company's total."

What’s Next

CEO Elon Musk will be in Shanghai for a government event Tuesday, and the firm is expected to sign a memorandum of understanding with local organizations soon.

Tesla's stock traded around $326.61 at time of publication, up 2.5 percent in Tuesday's pre-market session.

Related Links:

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Why Tesla's China Situation May Be More Favorable Than Previously Imagined