After years of interest, electric automaker Tesla has confirmed their plans to build an assembly plant in China.

Tesla CEO Elon Musk announced after a meeting Tuesday with Chinese Officials that Shanghai will be the first non-American factory. They expect it to become operational in two years, and achieve full capacity in the next five years. At this stage, the plant is expected to produce as many as 500,000 cars per year.

Non-Chinese automakers currently are required to form a 50:50 joint venture with a local automaker in order to avoid the 25 percent tariff on imported cars. Though this has been raised to 40 percent on American made cars as a result of the ongoing trade war between China and the Trump Administration.

Tesla is constructing their plant in a special free-trade zone, which won't require a local partnership, though additional tariffs may still be present.

In response to the tariff increase, the price of Tesla vehicles in China has gone up. a Model S sedan has gone from $107,400 to $128,500.

Tariffs aside, China is a strong market for the electric automaker. The country has been making tremendous efforts to reduce vehicle emissions. Electric cars don't produce such, and the company can gain favorable benefits as a result.