Tesla to build huge Shanghai factory: local govt

US electric-car maker Tesla has reached an agreement to build a factory capable of producing 500,000 automobiles per year in Shanghai, the city's government said today.

The deal marks the biggest overseas foray yet for Tesla, which is looking to expand into global markets, plans that faced a potential threat from the intensifying China-US trade row.

An announcement by Shanghai's government said an agreement had been reached to build the plant in the commercial hub's Lingang district.

It said Shanghai would provide full support to Tesla in a project combing manufacturing, research and development, and sales and aimed at super-charging electric-vehicle development in the city.

Anticipation about a potential big Tesla investment had bubbled over the past year, with expectations spiking after Bloomberg News reported that Tesla boss Elon Musk would travel to the city today.

Tesla last month told shareholders that it was working with officials in China to build electric cars and battery packs in Shanghai.

At the time, Musk told employees the electric carmaker was being reorganised to speed up production of Model 3 vehicles -- a key to profitability at the fast-growing firm. China has emerged in recent years as the world's largest market for electric vehicles.