TESLA Inc. has set up a new wholly owned company in Shanghai, moving a step closer to producing its electric vehicles in China and establishing its first gigafactory outside U.S. shores.

Tesla’s Hong Kong division registered the new company with a capital of 100 million yuan (US$15.8 million), Xinhua reported Monday.

Tesla received the business license for its subsidiary from the market regulation bureau of the Pudong New Area on Thursday, according to the National Enterprise Credit Information Publicity System.

The business scope of the unit includes technological development and services on electric vehicles, auto parts, batteries, energy storage facilities and solar panel products.

The Palo Alto, California-based company has been working with Shanghai’s government since last year to explore assembling cars in China.

In an earnings call earlier this month, Musk told investors that Tesla plans to announce the location of a gigafactory in China as early as in the third quarter of this year.

Previously, he said his company will probably make the Model 3 sedan and Model Y crossover in China and won’t build the pricier Model S and Model X here.

Tesla’s global revenue for 2017 grew 67 percent to nearly US$12 billion. The Chinese market contributed US$2 billion, up 90 percent.(SD-Agencies)