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Tesla Inks Deal to Build Factory in Shanghai, 1st Outside US

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Tesla, Inc. (TSLA - Free Report) inked a deal to build its first factory outside the United States, per Associated Press. With this factory in Shanghai, this electric vehicle (EV) manufacturer will be the first wholly-owned foreign automaker in China. The deal was announced after Tesla raised prices of Model X and Model S vehicles by 20% in China. The automaker resorted to this move as the U.S.-China trade war started to affect auto companies. Also, the promise made by Chinese authorities in April to end restrictions, which required foreign automakers to tie up with local partners, might have prompted the automaker to take such a decision.

Importantly, China is the world’s biggest EV market. But, Tesla and many other automakers were unwilling to shift manufacturing facilities to this country because of the restriction to share technology with local partners. For Tesla, China is the second largest market after the United States.

Tesla added that the construction for the new factory would start only after the obtainment of the necessary official permits. No details of the deal have been provided. However, this may turn out to be the biggest foreign investment in Shanghai.

In the past three months, shares of Tesla have outperformed the industry it belongs to. Its stock has returned 9.6% in comparison with the industry’s increase of 2.1%.

Tesla currently has a Zacks Rank #3 (Hold).

A few better-ranked stocks in the auto space are American Axle & Manufacturing Holdings, Inc. (AXL - Free Report) , Magna International Inc. (MGA - Free Report) and Fox Factory Holding Corp. (FOXF - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

American Axle & Manufacturing has an expected long-term growth rate of 8.1%. Over the past year, shares of the company have gained 3.5%.

Magna has an expected long-term growth rate of 8.5%. Over the past year, shares of the company have gained 27.5%.

Fox Factory has an expected long-term growth rate of 12.5%. Shares of the company have risen 45.7% over the past year.

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