According to Xinhua state media, US electric carmaker Tesla has acquired land in Shanghai for a megapack battery manufacturing plant that is expected to produce 10,000 energy storage batteries per year. Construction is slated to begin next year, and production should start by the end of 2024. A company spokesman said the battery project is a milestone for Tesla, adding that the plant will showcase the company’s commitment to driving the energy transition forward through enhanced storage solutions.

The spokesman added that purchasing the land is essential for the electric carmaker, which wants to become a leading supplier of energy-storage batteries in the rapidly expanding global market. The company also plans to build a new vehicle factory in China, which it has dubbed Gigafactory 3. The plant would be the first such facility to produce only battery packs and could eventually churn out 1 million cars per year.

China is a crucial market and manufacturing center for Tesla, which already has a car factory on the outskirts of Shanghai that produces Model 3 and Model Y vehicles for domestic and European markets. Tesla’s existing car factory was forced to shut down briefly during the coronavirus pandemic, but it resumed production later this year with help from local officials.

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China, where rising electric vehicle star BYD Co Ltd is based, has shown openness to American companies seeking to enter its booming market. Government officials rolled out the red carpet for Tesla when it set up its first overseas plant in early 2019 and assisted with the smooth restart of operations during the pandemic.

Unlike most Chinese car plants, the Shanghai Giga factory is wholly owned by Tesla and not operated as a joint venture with a local partner, which can limit output capacity. According to Tesla’s latest earnings report, it has a production capacity of 1.1 million cars a year. Expansion prospects for this plant still hinge on gaining regulatory approval.

A signing ceremony was held on Friday for the acquisition of the new land, Xinhua reported. Tesla paid 222.42 million yuan ($31.13 million) for use rights to a 19.7-hectare (48.7 acres) plot, a separate government statement said on Thursday.

The site is near an existing Tesla plant producing Model 3 and Model Y cars, which will continue to make the SUVs once production at the new site begins. Tesla’s chief executive, Elon Musk, has vowed to increase production capacity at the Shanghai plant in the coming years as it prepares to assemble a long-range electric SUV codenamed Project Juniper.

Tesla also is preparing to start making its upgraded version of the Model 3, with an exterior redesign and changes in the interior. The redesigned Model 3 is expected to go on sale next year.