Tesla CEO Elon Musk broke ground on a new factory in Shanghai, making it the first manufacturing plant for the electric carmaker located outside the US.
The facility will produce Model 3 and Model Y cars, as Tesla makes moves to grow its presence in the world's largest car market.
In a series of tweets on Monday, Mr Musk said plant would build "affordable versions" of the Tesla Model 3 - the carmaker's mass market vehicle - and its proposed Model Y for the Greater China region.
He stated that the ‘Gigafactory 3’ would start Model 3 production at the end of year.
The new factory will also help Tesla avoid US tariffs on car imports into the country. Carmakers have criticised US President Donald Trump's tariffs, which have targeted the car sector among others.
China has raised import duties on US-made cars as part of the broader trade fight with the US, and Tesla warned in October that such tariffs were creating challenges.
Negotiations aimed at resolving the drawn-out trade dispute between US and China taking place in Beijing this week.