• The report comes a day after Electrek said the electric-car maker raised prices of its Model S and Model X vehicles produced in China by more than $20,000 apiece.
  • Tesla shares are up more than 2%.

Shares of Tesla are rallying Tuesday morning, up more than 2%, after a report says the electric-car maker is planning to build a factory in China that can produce 500,000 vehicles a year.

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

Tesla has long been trying to work out a deal with local authorities for a plant in China. Back in October, the car maker held talks with Shanghai's municipal government to set up a factory in the region. CEO Elon Musk has said he hoped to begin producing cars in the country in 2020.

Tuesday's developments come one day after Electrek reported the auto maker was raising the price of its Model S and Model X vehicles in China by more $20,000 apiece amid rising trade tensions with the US.

It's been a roller coaster year for Tesla shareholders. They've had to deal with concerns about the need to raise more cash, as well as the "production hell" it has gone through to try and meet its goal of producing 5,000 Model 3 sedans a week.

The electric-car maker finally hit its milestone at the end of June, prompting Musk to tell employees, "

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