The said the plant will produce "affordable versions" of the Model 3 and Model Y, while more expensive versions, such as the Model 3 Performance, along with the Model S and Model X will continue to be produced at the company's main factory in Fremont, California, and exported to China.
Domestic production would help shield Tesla against import duties as the US and China find ways to wriggle out of the tariff quandary.
Construction has officially begun on Tesla's new massive manufacturing plant on the outskirts of Shanghai, which, in the not too distant future, hopes to turn out half a million cars a year.
'With the construction of the Shanghai factory, the faster the better (for Tesla)'.
"Looking forward to visiting soon for the groundbreaking of GigafactoryShanghai!".
China is the largest market for electric vehicles, and most forecasters predict EV sales in the country will accelerate rapidly as government regulation drives toward a goal of 100 per cent electric vehicles by 2030.
Gigafactory 3 will be China's first wholly foreign-owned auto plant and should allow Tesla to minimise the impact of the trade war which has seen Beijing impose big tariffs on USA vehicle imports.
China and the U.S. have been in a trade war for much of 2018 that has seen the flow of hundreds of billions of dollars worth of goods between the world's two largest economies disrupted by tariffs.
It has an annual production capacity of 500,000 electric cars.
Apple sparked global alarm over the prospects for the world's second-largest economy last week when it cut its revenue forecast, citing slowing demand in China and the trade war.
Tesla CEO Elon Musk says the automaker is breaking ground for a Shanghai factory and will start production of its Model 3 by the end of the year.
The automaker has said it aims to initially produce about 3,000 Model 3 vehicles per week at the plant and localise its manufacturing and supply chain.
Analysts have said production in China would allow Tesla to avoid such tariffs, which already have caused a spike in the price of the cars that Tesla now imports to the Chinese market.
A fully owned facility also would mean Tesla won't need to share its profits and technology with Chinese partners, unlike other foreign carmakers who are required to form a domestic joint venture. He provided no price figures for China-made cars.
Tesla has yet to give a price tag but the Shanghai government said it would be the biggest foreign investment there to date.
Apple’s CES Ad Hits Google And Amazon Where It Hurts
LG has followed in its recent tradition of pre-announcing many of its biggest CES products in the days ahead of the show. The black and white image also includes an outline of an iPhone XS and Apple's privacy webpage address.