Tesla to invest $5bn in Chinese car factory

Tesla Inc. Chief Executive Elon Musk signs agreements with Chinese authorities to invest $5 billion building a factory in China as the trade war with the U.S. makes establishing production in the world’s fastest-growing auto market more imperative for the electric-car pioneer, a person familiar with the matter said.

The factory would have an annual capacity of 500,000 cars and give it roots in the world’s biggest market.

In addition to helping Musk sell more cars, having a China production facility would help it avoid costly tariffs.

The automaker’s stock closed at 322.47, up 1.2% on the stock market today. The stock rose 3% Monday as Bloomberg reported that Musk was headed to China.

On Monday it was reported that Tesla prices on the Model S and X have risen about 20% in China, or about $20,000 apiece, following that country’s first round of retaliatory tariffs in the trade war with the U.S. last week.

The measures initiated by the Chinese government follow tariffs that President Donald Trump placed on China goods.

China has been one of Tesla’s core markets, but the price hike due to tariffs will likely put a dent in demand. In February, the automaker said it had more than 1,000 Superchargers and 2,000 Destination Chargers across China. The company has also expanded its retail and service presence to more than 35 locations in 2017.

Musk has also talked about adding a “gigafactory” in China. That could be used to build autos as well as batteries. The China plant would be its second car-manufacturing facility.

Tesla currently builds all its cars at an assembly plant in Fremont, Calif. It also has a battery factory in Nevada. Musk also has said Tesla will build a car-manufacturing plant in Europe, suggesting Germany might be the location.