On Tuesday, Tesla Inc stated, it has started work on building its Model Y electric sports utility vehicles (SUV) at its $2 billion China factory in Shanghai.

The development comes in the wake of Tesla starting to deliver its Model 3 sedans which were built at its Shanghai factory which was up and running in just 357 days – a record for global automakers in China. The first batch of Model 3 sedans were handed to its employees.

“We are holding today a ceremony to mark the start of the China-made Model Y programme,” said senior Shanghai government official Zhu Zhisong at the ceremony, which was also attended by Tesla’s CEO Elon Musk, Shanghai Mayor Ying Yong and other senior government officials.

Musk said that “ultimately Tesla Model Y will have more demand than probably all the other cars of Tesla combined”.

Shanghai’s Vice Mayor Wu Qing said, he hopes Tesla will manufacture more models at its Chinese plant and that the carmaker extend its cooperation with the city.

In March 2019, Tesla had unveiled its Model Y SUV and had commenced production in October at its Fremont facility, ahead of schedule.

Margin expectations of the Model Y are higher than the Model 3 while production costs are around the same.

According to Tesla’s China website, the starting price for Model Y vehicles is $63,911.56 (444,000 yuan). Retail prices will be announced later.

Tesla’s China-made Model 3 sedans are priced at 355,800 yuan before subsidies.