US car-maker Tesla is all set to open its first overseas manufacturing facility in China, Reuters has reported. Tesla CEO and celebrated entrepreneur Elon Musk announced the decision after an agreement with authorities in Shanghai.

The announcement comes in the wake of tariffs imposed by China in the ongoing trade war between China and USA. The 25 percent tariff imposed on auto products imported into China had forced Tesla to hike the prices of its cars in the country recently.

The car-maker is also planning to invest in research and development facilities in China. Tesla shares went up by 1.5 percent after the announcement was made. The Shanghai municipal government has assured full support to the project. When complete, the new 500,000-cars a year plant will double Tesla’s current production capacity.

China's auto market is currently bigger than that of USA and is expected to grow to twice the size of American market by 2025. The scale of China operations of Tesla is expected to increase as the Chinese government has decided to have only electric vehicles in the country by 2030.

This plant however, comes as a blow to Trump's goal to encourage American companies to invest more in the United States. Recently, Harley Davidson too had announced plans to manufacture its bikes abroad because of retaliatory tariffs by European Union.