But since Tesla announced plans for the factory on land outside Shanghai's urban core, the outlook for China's consumer market has turned worrisome.
The Shanghai-based Gigafactory should produce roughly 500,000 vehicles per year, much higher than most manufacturing plants producing from 200,000 to 300,000 units per year.
Electric carmaker Tesla's first plant outside the USA, the Gigafactory 3 in Shanghai, is about to begin construction.
Tesla unveiled its first Gigafactory in 2016, which was initially a "tent" production facility in the Nevada desert.
"This will be the most advanced Tesla gigafactory.With resources here, we are able to build this factory in record time, and we are hoping to have initial production of Tesla Model 3 toward the end of the year and volume production next year", 47-year-old Musk said.
Tesla has broken ground at Gigafactory 3 in Shanghai, China during a ceremony attended by chief executive Elon Musk. The company wants to take advantage of demand for electric vehicles in the world's biggest auto market.
In July, Tesla raised the prices of the Model 3 and the Model Y by about 20 per cent in the mainland after Beijing slapped an additional 25 per cent tariff on American-made vehicles, a retaliatory measure against the U.S. administration as trade tensions between the two countries escalated. The two sides have called a truce in their trade fight and are engaged in talks to cool tensions, with China temporarily scrapping a retaliatory 25 percent tariff on USA -made cars starting January 1.
Tesla's US-made cars are now subject to a 15 per cent tariff in the mainland after Beijing rolled back an extra 25 per cent tariff it slapped on U.S. auto imports for three months from January 1.
But the drop in the sales isn't just a direct effect of the trade war, which is why Monday's groundbreaking comes at an uncertain time.
China is the largest market for electric vehicles, and most forecasters predict EV sales in the country will accelerate rapidly as the government drives toward a goal of 100 per cent electric vehicles by 2030. He said higher-priced models will be built in the United States.
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.
"Shanghai Giga production of Model 3/Y will serve greater China region", Musk added in another one. He provided no price figures for China-made cars.
Tesla has said it plans to use mostly local debt to fund the factory.