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Shares of Tesla were rallying overnight, up more than 2 per cent, after a report said the electric-car maker was planning to build a factory in China that could produce 500,000 vehicles a year.

That would double Tesla’s production and likley bring new opportunities for ASX-listed battery metals producers.

Bloomberg’s report, which cites people familiar with the plans, says Tesla will sign a memorandum of understanding with the local government in Shanghai.

“Construction will begin soon after approvals and permits are secured, and the first vehicles will roll off the line within roughly two years,” Bloomberg reported.

It would take another two to three years for the factory to reach its capacity to build about 500,000 vehicles annually.

Tesla has long been trying to work out a deal with local authorities for a plant in China.

The carmaker held talks with Shanghai’s municipal government back in October to set up a factory in the region. CEO Elon Musk has said he hopes to begin producing cars in the country in 2020.

Tuesday’s developments come one day after the electric-vehicle-focused news website Electrek reported that the carmaker was raising the price of its Model S and Model X vehicles in China by more $US20,000 apiece amid rising trade tensions with the US.

It’s been a roller-coaster year for Tesla shareholders. They have had to deal with concerns about the company’s cash supply as well as the “production hell” the automaker has gone through to try to meet its goal of producing 5,000 Model 3 sedans a week.

Tesla announced it finally hit its milestone at the end of June, prompting Musk to tell employees, “I think we just became a real car company.”

Tesla is expected to report a second-quarter loss of $US2.76 a share on revenue of $US4.1 billion on August 1, according to analysts surveyed by Bloomberg.

Shares were up about 7% this year through Monday.

 

This article first appeared on Business Insider Australia, Australia’s most popular business news website. Read the original article. Follow Business Insider on Facebook or Twitter.