Tesla is reportedly planing to build a plant in China that produces 500,000 vehicles a year

AP Photo/Ng Han Guan

Shares of Tesla are rallying Tuesday morning, up about 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.

The announcement comes 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.

This story is developing...

Get the latest Tesla stock price here.