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

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

"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.

The Shanghai Bureau of Planning and Land Resources said on Wednesday that a plot of land of 864,885 square meters had been sold at auction at a price of 973 million yuan ($140.51 million).