Tesla will build its first factory outside the US in the free trade zone outside Shanghai, China.
Until now, China has required all foreign manufacturers to partner with a Chinese company before building a factory within the country however not this time, Tesla will be the sole owner of the factory. For this understanding Tesla cars produced in China, will be subjected to the same 25% tariff that is applies to all cars imported into China. Tesla apparently feels that not sharing its technology with a local company is worth more than avoiding the 25% fee.
Tesla is deeply committed to the Chinese market, and is busy evaluating potential manufacturing sites around the globe to serve the local markets. While they expect most of the production to remain in the US, they do need to establish local factories to ensure affordability for the markets they serve.