Tesla Inc has signed an agreement with the Shanghai government for an 860,000 square metre plot of land to build its first overseas Gigafactory, the electric carmaker said in a Chinese social media post on Wednesday.

The land agreement marks a key step towards the firm and its Chief Executive Elon Musk making cars locally in China for the fast-growing market, even as tariffs imposed by Beijing on US-made goods have caused it to hike prices of its imported models.

Tesla signed a long-anticipated deal with Shanghai authorities in July to build its first factory outside the United States, which would double the size of its global manufacturing and help lower the pricetag of Tesla cars sold in the world’s largest auto market. “Securing this site in Shanghai, Tesla’s first Gigafactory outside of the United States, is an important milestone for what will be our next advanced, sustainably developed manufacturing site,” Robin Ren, Tesla’s vice-president of worldwide sales, said in a statement.

Tesla did not give the price tag for the plot, but the Shanghai Bureau of Planning and Land Resources said that a plot of land of 864,885 square metres had been sold at auction at a price of 973 million yuan ($140.51 million).

Tesla signed a deal with Shanghai authorities in July to open a plant in the Chinese city with an annual capacity of 500,000 cars.

The factory will help tap China’s rapidly growing market for so-called new-energy vehicles.