US-based EV manufacturer Tesla has confirmed that it will build a "gigafactory" in China, writes CNBC.

Plans for the factory have been on the table for a year, but the company has just now signed an agreement with the municipal government in Shanghai.

Tesla still needs to secure several licenses, and it may take up to five years before the factory is operating at full capacity and thereby able to produce 500,000 electric cars per year.

"Last year, we announced that we were working with the Shanghai Municipal Government to explore the possibility of establishing a factory in the region to serve the Chinese market. Today, we have signed a Cooperative Agreement for Tesla to start building Gigafactory 3, a new electric vehicle manufacturing facility in Shanghai," Writes Tesla in a statement, according to CNBC.

Tesla founder and CEO Elon Musk announced already back in 2014 that the company has big plans in China, including a nation-wide network of recharging stations. China is well underway in becoming the world's largest EV market, thereby becoming a big potential money maker for Tesla, says an analyst to CNBC.

The new announcement from Tesla comes shortly after the company had to raise its prices by 20 percent due to new tariifs.

English Edit: Daniel Frank Christensen

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