U.S. electric carmaker Tesla broke ground for its Shanghai plant with Chief Executive Elon Musk announcing a plan to start production of its Model 3 by the end of 2019. The USD5 billion project has taken off very quickly as China is eager to attract new investment projects. Construction began just three months after Tesla secured a land parcel at Lingang, Shanghai, for the Gigafactory 3, its first plant outside the United States. The factory in Shanghai will produce “affordable versions of 3/Y for Greater China,” Musk said, adding that the higher-priced S/X models would still be built in the U.S. Wu Qing, Vice Mayor of Shanghai, said the Tesla factory, the largest foreign direct investment project on record in Shanghai, was progressing on a rapid pace with the local government’s support.

Gigafactory 3 was expected to produce around 3,000 Model 3 vehicles a week in the initial phase, ramping up to 500,000 vehicles per year when it became fully operational, Tesla said in a statement. Tesla’s U.S.-made cars are now subject to a 15% tariff on imports to China after Beijing rolled back an extra 25% tariff it slapped on U.S. car imports for three months from January 1. A Model 3 car now sells for CNY499,000 in China. But a locally-produced Tesla car, with reductions in manufacturing and logistics costs on top of the exempted import tariff, is expected to cost as little as CNY300,000, a level that could attract thousands of Chinese customers.

As the Chinese government gradually removes ownership restrictions on automotive joint ventures, Tesla became the first foreign carmaker to set up a wholly-owned new-energy vehicle (NEV) factory in China. China is the world’s largest auto and NEV market, with Beijing aspiring to become the global NEV leader with technologies that meet the highest international standards by 2025. NEV sales in China jumped 75.6% in the first 10 months of 2018 from a year earlier, hitting 860,000 units.

But Tesla will face competition from local electric car start-ups such as Byton, Nio and Xpeng Motors, the South China Morning Post reports. As Elon Musk was breaking ground on its factory in Shanghai, Byton, headquartered in Nanjing, presented its electric sport utility vehicle (SUV) M-Byte at the CES fair in Las Vegas. The M-Byte has five screens: a 49-inch, edge-to-edge dashboard display, a tablet embedded in the steering wheel and a new 8-inch touch screen in the center console, combined with two more on the headrests for rear-seat passengers. The company is working with “deep integration” apps including navigation and music that will provide individualized recommendations based on one’s calendar schedule and interest preferences stored in the cloud. The model will feature Amazon’s Alexa for overseas markets and Baidu’s voice control for China. Byton is also working with U.S. self-driving start-up Aurora and Baidu on self-driving technology for foreign and local markets, respectively. Deliveries are slated for the end of this year in China.

Meanwhile, Baidu, operator of China’s largest search engine, has entered a partnership deal with California-based autonomous delivery start-up Udelv that will see self-driving vans powered by its software to offer delivery services to American retailers such as Walmart from February. The delivery services will operate alongside robo-taxis from Alphabet’s Waymo, putting China’s champion up against one of its biggest autonomous driving rivals in the U.S. market. Nasdaq-listed Baidu announced the deal with Udelv at a launch event for its latest open self-driving platform – Apollo 3.5 – on the sidelines of the 2019 CES tech fair in Las Vegas.