Today, Tesla will be breaking ground for its Shanghai Gigafactory, which is the company’s first outside the US. In Shanghai, Tesla will begin manufacturing both batteries and the Model 3 electric vehicles by year-end.

Company chief Elon Musk has tweeted in a Twitter thread, ahead of the start of construction of the site, that the factory will produce affordable versions of the Model 3 and Model Y for greater China. Tesla plans to produce its Model 3 and Model Y cars in the initial phase of production at the Shanghai plant, with an annual capacity of 250,000 vehicles. High-volume Model 3 production in Gigafactory 3 is expected to start sometime in 2020.

A local plant will help Tesla lower prices in the market to compete with a new generation of local rivals including Nio Inc, Byton and XPeng Motors. “Affordable cars must be made on same continent as customers,” Musk said.

The Shanghai Tesla Gigafactory would also be China’s first wholly foreign-owned car plant, a reflection of China’s broader shift to open up its car market even amid the whipsawing trade war.

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