The project was announced in April after Tesla chief Elon Musk presented a vague but ambitious plan to investors to turbocharge growth.
Company representatives signed an agreement to acquire land for the factory on the outskirts of Shanghai on Friday morning, according to state news agency Xinhua.
The plant is expected to make 10,000 units of Tesla's Megapack batteries per year, and "break ground in the first quarter of 2024 and start production in the fourth quarter", Xinhua said.
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.
Musk visited China earlier this year, meeting with senior officials in Beijing and visiting the Shanghai Gigafactory.
Musk's interests in China have long raised eyebrows in Washington, with President Joe Biden saying in November that his links to foreign countries were "worthy" of scrutiny.
tjx/reb/ssy
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