SHANGHAI, Jan. 7 (Xinhua) - US electric carmaker Tesla Inc. on Monday broke ground on its Shanghai factory, becoming the first to benefit from a new policy allowing foreign carmakers to set up wholly-owned subsidiaries in China.

Tesla CEO Elon Musk speaks at the groundbreaking ceremony for Tesla's Shanghai Gigafactory in Shanghai, China on January 7, 2019. (Photo: VCG)

The new plant, Tesla's first outside the United States, is located in Lingang Area, a high-end manufacturing park in the southeast harbor of Shanghai. It is designed with an annual capacity of 500,000 electric cars.

Tesla signed the agreement with the Shanghai municipal government in July 2018 to build the factory. In October, the company was approved to use an 864,885-square-meter tract of land in Lingang for its Shanghai plant.