Tesla Inc. (NASDAQ: TSLA) shares rose on Tuesday after Bloomberg reported that the electric car maker reached a preliminary agreement with the Shanghai government to build an assembly plant.

According to Bloomberg, the plant is expected to have the capacity to produce 500,000 vehicles per year for Chinese consumers in two to three years’ time. The report came amidst the trade war between China and the United States. According to South China Morning Post, Tesla will increase prices by 20% for the models sold in China, after the Chinese government imposed additional duties on American-made automobiles. A Model S is expected to cost 989,222 yuan for a mainland customer, 139,320 yuan higher than Model S current price.

According to data from the China Automobile Dealers Association, Tesla sold 17,000 vehicles in Mainland China in 2017, about 50% higher than that in 2016. China is the world’s largest auto market, accounting 17% of Tesla’s revenue in 2017.

China is also considered as the fast-growing market for electric vehicles, as a result, Tesla has been trying to expand its capacity in China over the past year. Building vehicles in China will lower the price and help Tesla gain electric vehicles market shares.

Tesla shares rose 1.60% to USD 323.55 per share in the early trading on Tuesday. The stock was up 3.85% this year.