This photo taken on January 27, 2023 shows a Tesla charger plugged into Tesla Model S at an electric vehicle charging station in Tokyo. Last year, 59,000 new EVs were sold in Japan, a record and a three-fold annual increase, but still less than two percent of sales of all cars in the country in 2022. Yuichi YAMAZAKI / AFP

The factory, which will have an initial capacity of 10,000 Megapack units per year, is expected to "start production in the second quarter of 2024", according to the Xinhua News Agency.

The US electric car maker says its Megapacks are intended to store energy and stabilise supply for power grids, with each unit able to store more than 3 megawatt-hours of power.

The plant will be Tesla's second factory in the Chinese city after its massive Shanghai Gigafactory, which broke ground in 2019.

Lu Yu, a local official, said the new battery factory was expected to create an "industrial cluster" worth more than $14 billion, according to Xinhua.

The announcement comes after Tesla chief Elon Musk presented a vague but ambitious plan to investors to turbocharge growth.

Tesla has hit its stride after years of losses, scoring an impressive string of earnings records as it has added factories and ramped up production.

The company has also acted as a major catalyst for a revolution in transportation, with much of the automobile sector's innovation efforts moving away from the internal combustion engine towards EVs.

Even with that success, Musk has fallen short of some of his outsized goals.

Tesla's lowest-priced vehicle, the Model 3, begins at $43,000 in the United States -- too pricey for many consumers for a vehicle that had been pitched at the mass market.

Musk has also missed his own deadlines for a fully autonomous vehicle, with Tesla driver-assistance technology spurring US regulatory probes.

Musk's ties to China have also raised eyebrows in Washington, with US President Joe Biden saying in November the executive's links to foreign countries were "worthy" of scrutiny.