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), the National Enterprise Credit Information Publicity System said on its website. The business scope of the unit includes technological development and services on electric vehicles, auto parts, batteries, energy storage facilities and solar panel products, according to the website.

A representative for Tesla China wasn’t able to comment immediately.

The Palo Alto, California-based company has been working with Shanghai’s government since last year to explore assembling cars in China. Last month’s announcement by Beijing that it will allow foreign new-energy vehicle makers to fully own auto factories as early as this year removed the primary hurdle in the way of founder and billionaire Elon Musk. The change in policy also came in the midst of a raging trade spat between the U.S. and the world’s second-biggest economy.

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 had 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 there.